Situations where the current futures price lies below the expected futures price are called:

A) contango
B) normal contango
C) backwardation
D) normal backwardation

Question

Situations where the current futures price lies below the expected futures price are called:

A) contango
B) normal contango
C) backwardation
D) normal backwardation

Quizplus · Accepted Answer

The situation in which the current futures price lies below the expected futures price,and hence below the expected future spot price,as in the presence of a risk premium,is known as normal backwardation.

Situations Where the Current Futures Price Lies Below the Expected