The lease rate is the amount that a lender requires as compensation for lending a commodity. In determining the price of a commodity futures contract, the lease rate, δl, is subtracted from the risk-free rate, r, as follows:
Assuming a positive lease rate, the lease rate effectively reduces the futures price, all else constant. This also assumes that there is an active market for lending the commodity underlying the futures contract. The lease rate can only be earned by actually lending the underlying commodity.
