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.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Bibliography
Hicks, J.R. 1946. Value and Capital, 2nd edn, London: Oxford University Press.
Kawai, M. 1983. Price volatility of storable commodities under rational expectations in spot and futures markets. International Economic Review 24 (2), June, 435–54.
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.
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.
Peck, A.E. (ed.) 1977. Selected Writings on Futures Markets, Vol. 2. Chicago: Chicago Board of Trade.
Editor information
Copyright information
© 1989 Palgrave Macmillan, a division of Macmillan Publishers Limited
About this chapter
Cite this chapter
Kawai, M. (1989). Backwardation. In: Eatwell, J., Milgate, M., Newman, P. (eds) Finance. The New Palgrave. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-20213-3_8
Download citation
DOI: https://doi.org/10.1007/978-1-349-20213-3_8
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-0-333-49535-3
Online ISBN: 978-1-349-20213-3
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)