Main Profile

At A Glance

Theory of normal backwardation

This is the classic, but difficult idea, that offers an explanation for why we expect the forward price to be less than the expected future spot price: F less than E[future spot]. The key to the theory is the assumption that hedgers are, on average, taking short positions (e.g., a corn farmer needs to *short* because he/she plans to sell the commodity in the future)
Length: 10:41


Questions about Theory of normal backwardation

Want more info about Theory of normal backwardation? Get free advice from education experts and Noodle community members.

  • Answer