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| In futures or options trading, a market in which longer-term contracts have a higher market price than near-term contracts.
| | ''Investment''. |
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| The premium attached to longer maturities is a normal condition of markets, reflecting the cost of carry of the commodity (for the contracted future delivery). | | The excess of the yield on a higher-yielding investment, over a lower-yielding one. |
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| The further into the future the final maturity date, the higher the price of the contract.
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| That usual pricing relationship is known as contango.
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| If - unusually - the opposite is true, and the price of a longer-term contract is lower than the price of a related one with an earlier maturity date, the pricing relationship is known as backwardation.
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| == See also == | | == See also == |
| * [[Backwardation]] | | * [[Project finance]] |
| * [[Cost of carry]] | | * [[Yield]] |
| * [[Super contango]] | | * [[Yield spread]] |
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| [[Category:Manage_risks]]
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Revision as of 16:56, 14 May 2016
Investment.
The excess of the yield on a higher-yielding investment, over a lower-yielding one.
See also
