Little tip

CFA Level II Derivatives
#1

Backwardation = Benefits

Contango = Costs

You’re welcome

#2

Nice!

#3

solid

#4

I don’t get it?

#5

Backwardation => FP < Spot => benefits to holding the asset

Contango => FP > Spot => Costs to holding asset

#6

I guess this would be true for normal backwardation as well?

#7

Am I missing something here? How is it beneficial to hold an asset if in norm backwardation futures price is expected to decline, so hedgers short the asset.

#8

Forward contracts forgo the carry benefits. like coupons, you dont recieve mid contract coupons, but it is embedded in the original price of the bond

#9

My girlfriend calls me “Little Tip”