Analysis of information sources in references of the Wikipedia article "Normal backwardation" in English language version.
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The basis can, however, be below this maximum. In fact, it can be negative, a situation sometimes referred to as an inverted market, with a backwardation or spot premium in evidence. There is no process of riskless and profitable dealing which necessarily restores the basis to its maximum.
The notion of normal backwardation involves a comparison of the futures price to the expected spot price in the future, which is unobservable when the futures price is set. In the practice of commodity trading the term "backwardation" is commonly used to describe the basis of a futures position, which is defined as the difference between the current spot price and the futures price.
the normal backwardation hypothesis, according to which a commodity's futures price tends to be a downward biased estimate of its spot price in the cash market at the contract's maturity date. The theory maintains that, on balance, there is an excess of short hedgers who wish to avoid the risk of downward commodity price movements and are therefore willing to sell their goods at a price lower than the spot price expected to prevail at maturity in order to induce speculators to take up the slack in the long side of the market. In effect the hedgers offer speculators an insurance premium for their services.
The notion of normal backwardation involves a comparison of the futures price to the expected spot price in the future, which is unobservable when the futures price is set. In the practice of commodity trading the term "backwardation" is commonly used to describe the basis of a futures position, which is defined as the difference between the current spot price and the futures price.
The notion of normal backwardation involves a comparison of the futures price to the expected spot price in the future, which is unobservable when the futures price is set. In the practice of commodity trading the term "backwardation" is commonly used to describe the basis of a futures position, which is defined as the difference between the current spot price and the futures price.
the normal backwardation hypothesis, according to which a commodity's futures price tends to be a downward biased estimate of its spot price in the cash market at the contract's maturity date. The theory maintains that, on balance, there is an excess of short hedgers who wish to avoid the risk of downward commodity price movements and are therefore willing to sell their goods at a price lower than the spot price expected to prevail at maturity in order to induce speculators to take up the slack in the long side of the market. In effect the hedgers offer speculators an insurance premium for their services.
