Why is B correct, what does 'normal contangoed' mean? 谢谢
• insurance perspective, in which hedgers hold commodity inventories and seek to mitigate price risk by buying commodity futures;
• hedging pressure hypothesis, in which investors will receive a risk premium that is a positive excess return for going short in a 'normal contangoed' commodity futures market; and
• theory of storage, which predicts a direct relationship between the level of inventories and the convenience yield."
54. Which of Davidson's descriptions of the futures return models is most likely correct?
A. The description of the theory of storage
B. The description of the hedging pressure hypothesis
C. The description of the insurance perspective
Answer = B
The hedging pressure hypothesis states that investors will receive a risk premium that is a positive excess return for going short in a "normal contangoed" commodity futures market. The insurance perspective assumes that hedgers hold long positions in the underlying commodity and short positions in the futures to hedge their risk. The theory of storage predicts an inverse relationship between the level of inventories and the convenience yield.
