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.
This chapter was originally published in The New Palgrave: A Dictionary of Economics, 1st edition, 1987. Edited by John Eatwell, Murray Milgate and Peter Newman
This is a preview of subscription content, log in via an institution to check access.
Bibliography
Hicks, J.R. 1946. Value and capital, 2nd ed. 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): 435–454.
Keynes, J.M. 1923. Some aspects of commodity markets. In The Manchester guardian commercial, reconstruction supplement, 29 Mar. Reprinted in The collected writings of John Maynard Keynes, vol. 7. London: Macmillan.
Keynes, J.M. 1930. A treatise on money, vol. 2. London: Macmillan.
Peck, A.E. (ed.). 1977. Selected writings on futures markets, vol. 2. Chicago: Chicago Board of Trade.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 1987 The Author(s)
About this entry
Cite this entry
Kawai, M. (1987). Backwardation. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_444-1
Download citation
DOI: https://doi.org/10.1057/978-1-349-95121-5_444-1
Received:
Accepted:
Published:
Publisher Name: Palgrave Macmillan, London
Online ISBN: 978-1-349-95121-5
eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences