Finance pp 89-90 | Cite as

Backwardation

  • Masahiro Kawai
Part of the The New Palgrave book series (NPA)

Abstract

Using the language of the London Stock Exchange, ‘backwardation’ is a fee paid by a seller of stocks (or securities) to the buyer for the privilege of deferring delivery of them. Hence it means that the futures price (i. e. the current price for the future delivery) falls short of the spot price (i. e. the current price of immediate delivery). ‘Contango’, the reverse of backwardation, is a fee paid by the buyer who wants to postpone delivery, and means that the futures price exceeds the spot price. These terms may be extended to any futures transaction.

Keywords

Rational Expectation Future Market Market Equilibrium Future Price Current Price 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Bibliography

  1. Hicks, J.R. 1946. Value and Capital, 2nd edn, London: Oxford University Press.Google Scholar
  2. Kawai, M. 1983. Price volatility of storable commodities under rational expectations in spot and futures markets. International Economic Review 24 (2), June, 435–54.CrossRefGoogle Scholar
  3. Keynes, J.M. 1923. Some aspects of commodity markets. The Manchester Guardian Commercial, Reconstruction Supplement 29, March. Reprinted in The Collected Writings of John Maynard Keynes, Vol. 7, London: Macmillan; New York: St. Martin’s Press, 1971.Google Scholar
  4. Keynes, J.M. 1930. A Treatise on Money, Vol. 2. London: Macmillan. Reprinted in The Collected Writings of John Maynard Keynes, London: Macmillan; New York: St. Martin’s Press, 1971.Google Scholar
  5. Peck, A.E. (ed.) 1977. Selected Writings on Futures Markets, Vol. 2. Chicago: Chicago Board of Trade.Google Scholar

Copyright information

© Palgrave Macmillan, a division of Macmillan Publishers Limited 1989

Authors and Affiliations

  • Masahiro Kawai

There are no affiliations available

Personalised recommendations