Question 1: what is the “insurance premium” mentioned in the insurance perspective and the hedging pressure hypothesis? The CFAI doesn’t really give any explanation of this premium.
Question 2: the CFAI mentions that energy and livestock commodities have shown backwardation more than other commodities. However, later it states that these two commodity sectors have also historically shown positive roll return. Positive roll return is a sign of contango, so isn’t this inconsistent?
Thanks,
Question 2: the CFAI mentions that energy and livestock commodities have shown backwardation more than other commodities. However, later it states that these two commodity sectors have also historically shown positive roll return. Positive roll return is a sign of contango, so isn’t this inconsistent?
Thanks,