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Backwardation

Formally, backwardation means a downward sloping forward curve (as in an inverted yield curve). A backwardation starts when the difference between the forward price and the spot price is less than the cost of carry, or when there can be no delivery arbitrage because the asset is not currently available for purchase. The opposite market condition to backwardation is known as contango, in which the spot price is lower than the forward price....

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by Yue Pan // 25 February, 2015

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