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Explanation:
A high convenience yield means that holding the physical commodity provides important non-monetary benefits to the owner.
That makes ownership resemble a real option.
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Question 187.7: Which of the following is most likely true if a commodity has a high convenience yield?
A
The commodity’s forward curve exhibits contango
B
It is a financial (investment) commodity
C
There is a no-arbitrage forward price for the commodity, rather than a no-arbitrage region
D
Ownership of the commodity is modeled as a “real option” to the owner