Background Note | HBS Case Collection | July 1992 (Revised May 1996)

Note on Commodity Futures

by Kenneth A. Froot, Jay O. Light and Nancy Donohue

Abstract

Describes how commodity futures work, what products and exchanges are available, and who the players in the commodity markets are. Also presents a careful discussion of the pricing of futures in commodity markets, focusing on cost of carry and risk premium approaches, and explaining backwardation and contango markets.

Keywords: Futures and Commodity Futures;

Citation:

Froot, Kenneth A., Jay O. Light, and Nancy Donohue. "Note on Commodity Futures." Harvard Business School Background Note 293-018, July 1992. (Revised May 1996.)