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Chirag Gupta
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The Official Nerd
Asked: 2022-07-05T18:49:59+05:30 In:

commodity investment

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If a commodity’s forward curve is downward sloping and there is little or no convenience yield, the market is said to be in:

  1. backwardation.
  2. contango.
  3. equilibrium.

Solution

Solution

B is correct. Contango is a condition in the futures markets in which the spot price is lower than the futures price, the forward curve is upward sloping, and there is little or no convenience yield. Backwardation is the opposite condition in the futures markets, where the spot price exceeds the futures price, the forward curve is downward sloping, and the convenience yield is high. Equilibrium is an economic term where supply is equal to demand.

 

 

 

is question mei likha hua hai downward sloping and question mei upward sloping likha hai in case of contago. plz explain this.

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