FINA 450- The spot price of oil is $100 per barrel and the cost of storing
January 1st, 2018
The spot price of oil is $100 per barrel and the cost of storing a barrel of oil for one year is $5, payable at the end of the year. The risk-free interest rate is 2%per annum. What is an upper bound for the one-year futures price of oil? What is your best strategy in the market if the observed futures price is $112?