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Normal backwardation, also sometimes called backwardation, is the market condition where the price of a commodity's 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, 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.
Contango is a situation where the futures price of a commodity is higher than the expected spot price of the contract at maturity. In a contango situation, arbitrageurs or speculators are "willing to pay more [now] for a commodity [to be received] at some point in the future than the actual expected price of the commodity [at that future point]. 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, hedgers 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 market.
In finance, speculation is the purchase of an asset with the hope that it will become more valuable in the near future.
In finance, a futures contract 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 asset transacted is usually a commodity or financial instrument. The predetermined price of the contract is known as the forward 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.
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 at the time of conclusion of the contract, making it a type of derivative instrument. 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.
A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, gambles, many types of over-the-counter and derivative products, and futures contracts.
In finance, a spot contract, spot transaction, or simply spot, is a contract of buying or selling a commodity, security or currency for immediate settlement on the spot date, which is normally two business days after the trade date. The settlement price is called spot price. A spot contract is in contrast with a forward contract or futures contract where contract terms are agreed now but delivery and payment will occur at a future date.
In economics, nominal value is measured in terms of money, whereas real value is measured against goods or services. A real value is one which has been adjusted for inflation, enabling comparison of quantities as if the prices of goods had not changed on average; therefore, changes in real value exclude the effect of inflation. In contrast, a nominal value has not been adjusted for inflation, and so changes in nominal value reflect at least in part the effect of inflation but will not hold the same purchasing power.
In political economy and especially Marxian economics, exchange value refers to one of four major attributes of a commodity, i.e., an item or service produced for, and sold on the market. The other three aspects are use value, economic value, and price. Thus, a commodity has:
Labour power is a key concept used by Karl Marx in his critique of capitalist political economy. Marx distinguished between the capacity to do work, labour power, from the physical act of working, labour. Labour power exists in any kind of society, but on what terms it is traded or combined with means of production to produce goods and services has historically varied greatly.
A currency future, also known as an FX future or a foreign exchange future, is a futures contract to exchange one currency for another at a specified date in the future at a price that is fixed on the purchase date; see Foreign exchange derivative. Typically, one of the currencies is the US dollar. The price of a future is then in terms of US dollars per unit of other currency. This can be different from the standard way of quoting in the spot foreign exchange markets. The trade unit of each contract is then a certain amount of other currency, for instance €125,000. Most contracts have physical delivery, so for those held at the end of the last trading day, actual payments are made in each currency. However, most contracts are closed out before that. Investors can close out the contract at any time prior to the contract's delivery date.
In finance, a single-stock future (SSF) is a type of futures contract between two parties to exchange a specified number of stocks in a company for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange. The party agreeing to take delivery of the underlying stock in the future, the "buyer" of the contract, is said to be "long", and the party agreeing to deliver the stock in the future, the "seller" of the contract, is said to be "short". The terminology reflects the expectations of the parties - the buyer hopes or expects that the stock price is going to increase, while the seller hopes or expects that it will decrease. Because entering the contract itself costs nothing, the buy/sell terminology is a linguistic convenience reflecting the position each party is taking - long or short.
Prices of production is a concept in Karl Marx's critique of political economy, defined as "cost-price + average profit". A production price can be thought of as a type of supply price for products; it refers to the price levels at which newly produced goods and services would have to be sold by the producers, in order to reach a normal, average profit rate on the capital invested to produce the products.
Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. Often it is understood to include only downside risk, meaning the potential for financial loss and uncertainty about its extent.
The commodity channel index (CCI) is an oscillator originally introduced by Donald Lambert in 1980.
Murabaḥah, murabaḥa, or murâbaḥah was originally a term of fiqh for a sales contract where the buyer and seller agree on the markup (profit) or "cost-plus" price for the item(s) being sold. In recent decades it has become a term for a very common form of Islamic financing, where the price is marked up in exchange for allowing the buyer to pay over time—for example with monthly payments. Murabaha financing is similar to a rent-to-own arrangement in the non-Muslim world, with the intermediary retaining ownership of the item being sold until the loan is paid in full. There are also Islamic investment funds and sukuk that use murabahah contracts.
The international dollar, also known as Geary–Khamis dollar, is a hypothetical unit of currency that has the same purchasing power parity that the U.S. dollar had in the United States at a given point in time. It is mainly used in economics and financial statistics for various purposes, most notably to determine and compare the purchasing power parity and gross domestic product of various countries and markets. The year 1990 or 2000 is often used as a benchmark year for comparisons that run through time. The unit is often abbreviated, e.g. 2000 US dollars or 2000 International$.
Inflation rate in India was 5.5% as of May 2019, as per the Indian Ministry of Statistics and Programme Implementation. This represents a modest reduction from the previous annual figure of 9.6% for June 2011. Inflation rates in India are usually quoted as changes in the Wholesale Price Index (WPI), for all commodities.
"Value, Price and Profit" is a transcript of an English-language lecture series delivered to the First International Working Men's Association on June 20 and 27, 1865 by Karl Marx. The text was written between the end of May and June 27 in 1865, while Capital, Volume I was in preparation and one year before it was published. Value, Price and Profit was published as a book in 1898 by Marx's daughter Eleanor Marx Aveling.
References
- ↑ Grant, Mitchell; Kenton, Will. "Understanding Average Selling Price (ASP)". Investopedia.
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