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Applies to derivative products. Futures contracts trade in a "cost-of-carry market" where the underlying commodity can be stored, insured, and converted into the future easily and inexpensively. Arbitrageurs, because of the ease of switching from the spot commodity to futures, will keep these markets in line with prevailing interest rates.

Copyright © 2005, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

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