The Convenience Yield Implied in European Natural Gas Hub Trading

摘要

In this study, we investigate the estimates of the convenience yield implied in European natural gas hub trading. In addition to the net convenience yield, we provide two option-based approaches, which connect to the economic idea of the convenience yield as being the benefits from holding the physical commodity. In particular, we approximate the convenience yield via lookback and Asian options. Our empirical results are consistent with the intuition conveyed by the theory of storage. We conclude that the choice of an adequate approximation method should depend on the market under investigation, in particular, on the existence of market frictions such as short-sale constraints or restricted storage access.