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Contango
Contango is a situation in which the futures contract, futures price (or forward contract, forward price) of a commodity is higher than the spot price. In a contango situation, arbitrageurs or speculators are "willing to pay more for a commodity [to be received] at some point in the future than to purchase the commodity immediately. This may be due to people's desire to pay a premium to have the commodity in the future rather than paying the costs of storage and carry costs of buying the commodity today." On the other side of the trade, Hedge (finance), hedgers (commodity producers and commodity holders) are happy to sell futures contracts and accept the higher-than-expected returns. A contango market is also known as a ''normal market'' or ''carrying cost, carrying-cost market''. The opposite market condition to contango is known as backwardation. "A market is 'in backwardation' when the futures price is below the spot price for a particular commodity. This is favorable for inves ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Backwardation
Normal backwardation, also sometimes called backwardation, is the market condition where the price of a commodity's forward contract, forward or futures contract is trading below the ''expected'' spot price at contract maturity. The resulting futures or forward curve would ''typically'' be downward sloping (i.e. "inverted"), since contracts for further dates would typically trade at even lower prices. In practice, the expected future spot price is unknown, and the term "backwardation" may refer to "positive basis", which occurs when the current spot price exceeds the price of the future. The opposite market condition to normal backwardation is known as contango. Contango refers to "negative basis" where the future price is trading above the expected spot price. Note: In industry parlance backwardation may refer to the situation that futures prices are below the ''current'' spot price. Backwardation occurs when the difference between the forward price and the spot price is less ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Forward Contract
In finance, a forward contract, or simply a forward, is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed on in the contract, making it a type of derivative instrument.John C Hull'', Options, Futures and Other Derivatives (6th edition)'', Prentice Hall: New Jersey, USA, 2006, 3 The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position. The price agreed upon is called the ''delivery price'', which is equal to the forward price at the time the contract is entered into. The price of the underlying instrument, in whatever form, is paid before control of the instrument changes. This is one of the many forms of buy/sell orders where the time and date of trade is not the same as the value date where the securities themselves are exchanged. Forwards, like other derivative securities, can be used to hedge ris ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Lars Valentin Jacobsson
Lars Jacobsson (born May 11, 1965) is a Swedish entrepreneur, inventor, philanthropist, and conservationist. Career Jacobsson initially worked in the petroleum industry, where he was involved in starting up storage, trading and shipping companies, as well as being the inventor of the oil Contango market in the early 1990s. In early 2000s he sold his oil related businesses. Since 2005, he started up two solar energy companies. In 2010, Jacobsson founded TEXEL Energy, a Sweden-based company which develops solar energy technology and other applications based around the Stirling engine. These are applications such as; Thermal Energy Storage (thermal battery), flare gas, waste and landfill gas recovery to electricity and also for integrated AI capacity. In 2022, Jacobsson was appointed as an Expert Advisor for the European Union regarding large scale energy storage. Philanthropy Together with his wife Ragnhild Jacobsson, he founded The Perfect World Foundation, a non-profit and ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Cost Of Carry
The cost of carry or carrying charge is the cost of holding a security or a physical commodity over a period of time. The carrying charge includes insurance, storage and interest on the invested funds as well as other incidental costs. In interest rate futures markets, it refers to the differential between the yield on a cash instrument and the cost of the funds necessary to buy the instrument. If long, the cost of carry is the cost of interest paid on a margin account. Conversely, if short, the cost of carry is the cost of paying dividends, or rather the opportunity cost; the cost of purchasing a particular security rather than an alternative. For most investments, the cost of carry generally refers to the risk-free interest rate that could be earned by investing currency in a theoretically safe investment vehicle such as a money market account minus any future cash flows that are expected from holding an equivalent instrument with the same risk (generally expressed in percentag ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Futures Contract
In finance, a futures contract (sometimes called futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The item transacted is usually a commodity or financial instrument. The predetermined price of the contract is known as the ''forward price'' or ''delivery price''. The specified time in the future when delivery and payment occur is known as the ''delivery date''. Because it derives its value from the value of the underlying asset, a futures contract is a Derivative (finance), derivative. Contracts are traded at futures exchanges, which act as a marketplace between buyers and sellers. The buyer of a contract is said to be the Long (finance), long position holder and the selling party is said to be the Short (finance), short position holder. As both parties risk their counter-party reneging if the price goes against them, the contract may involve both ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Rational Pricing
Rational pricing is the assumption in financial economics that asset prices – and hence asset pricing models – will reflect the arbitrage-free price of the asset as any deviation from this price will be "arbitraged away". This assumption is useful in pricing fixed income securities, particularly bonds, and is fundamental to the pricing of derivative instruments. Arbitrage mechanics Arbitrage is the practice of taking advantage of a state of imbalance between two (or possibly more) markets. Where this mismatch can be exploited (i.e. after transaction costs, storage costs, transport costs, dividends etc.) the arbitrageur can "lock in" a risk-free profit by purchasing and selling simultaneously in both markets. In general, arbitrage ensures that "the law of one price" will hold; arbitrage also equalises the prices of assets with identical cash flows, and sets the price of assets with known future cash flows. The law of one price The same asset must trade at the same ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Convenience Yield
A convenience yield is an implied return on holding inventories. It is an adjustment to the cost of carry in the non-arbitrage pricing formula for forward prices in markets with trading constraints. Let F_ be the forward price of an asset with initial price S_t and maturity T. Suppose that r is the continuously compounded interest rate for one year. Then, the non-arbitrage pricing formula should be F_ = S_t \cdot e^ However, this relationship does not hold in most commodity markets, partly because of the inability of investors and speculators to short the underlying asset, S_t. Instead, there is a correction to the forward pricing formula given by the convenience yield c. Hence F_ = S_t \cdot e^ This makes it possible for backwardation Normal backwardation, also sometimes called backwardation, is the market condition where the price of a commodity's forward contract, forward or futures contract is trading below the ''expected'' spot price at contract maturity. The ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Exchange-traded Fund
An exchange-traded fund (ETF) is a type of investment fund that is also an exchange-traded product, i.e., it is traded on stock exchanges. ETFs own financial assets such as stocks, bonds, currencies, debts, futures contracts, and/or commodities such as gold bars. Many ETFs provide some level of diversification compared to owning an individual stock. An ETF divides ownership of itself into shares that are held by shareholders. Depending on the country, the legal structure of an ETF can be a corporation, trust, open-end management investment company, or unit investment trust. Shareholders indirectly own the assets of the fund and are entitled to a share of the profits, such as interest or dividends, and would be entitled to any residual value if the fund undergoes liquidation. They also receive annual reports. An ETF generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occur. The larges ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Interest
In finance and economics, interest is payment from a debtor or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct from a fee which the borrower may pay to the lender or some third party. It is also distinct from dividend which is paid by a company to its shareholders (owners) from its profit (economics), profit or Reserve (accounting), reserve, but not at a particular rate decided beforehand, rather on a pro rata basis as a share in the reward gained by risk taking entrepreneurs when the revenue earned exceeds the total costs. For example, a customer would usually pay interest to debt, borrow from a bank, so they pay the bank an amount which is more than the amount they borrowed; or a customer may earn interest on their savings, and so they may withdraw more than they originally deposited. In the case of savings, the customer is the lender, and the ban ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Government Bond
A government bond or sovereign bond is a form of Bond (finance), bond issued by a government to support government spending, public spending. It generally includes a commitment to pay periodic interest, called Coupon (finance), coupon payments'','' and to repay the face value on the Maturity (finance), maturity date. For example, a bondholder invests $20,000, called face value or principal, into a 10-year government bond with a 10% annual coupon; the government would pay the bondholder 10% interest ($2000 in this case) each year and repay the $20,000 original face value at the date of maturity (i.e. after 10 years). Government bonds can be denominated in a foreign currency or the government's domestic currency. Countries with less stable economies tend to denominate their bonds in the currency of a country with a more stable economy (i.e. a hard currency). All government bonds carry Default (finance), default risk; that is, the possibility that the government will be unable to ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Crude Oil
Petroleum, also known as crude oil or simply oil, is a naturally occurring, yellowish-black liquid chemical mixture found in geological formations, consisting mainly of hydrocarbons. The term ''petroleum'' refers both to naturally occurring unprocessed crude oil, as well as to petroleum products that consist of refined crude oil. Petroleum is a fossil fuel formed over millions of years from anaerobic decay of organic materials from buried prehistoric organisms, particularly planktons and algae, and 70% of the world's oil deposits were formed during the Mesozoic. Conventional reserves of petroleum are primarily recovered by drilling, which is done after a study of the relevant structural geology, analysis of the sedimentary basin, and characterization of the petroleum reservoir. There are also unconventional reserves such as oil sands and oil shale which are recovered by other means such as fracking. Once extracted, oil is refined and separated, most easily by disti ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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Egg (food)
Humans and other hominids have consumed eggs for millions of years. The most widely consumed eggs are those of fowl, especially chickens. People in Southeast Asia began harvesting chicken eggs for food by 1500 BCE. Eggs of other birds, such as ducks and ostriches, are eaten regularly but much less commonly than those of chickens. People may also eat the eggs of reptiles, amphibians, and fish. Fish eggs consumed as food are known as roe or caviar. Hens and other egg-laying creatures are raised throughout the world, and mass production of chicken eggs is a global industry. In 2009, an estimated 62.1 million metric tons of eggs were produced worldwide from a total laying flock of approximately 6.4 billion hens. There are issues of regional variation in demand and expectation, as well as current debates concerning methods of mass production. In 2012, the European Union banned battery husbandry of chickens. History Bird eggs have been valuable foodstuffs since prehistory, ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |