Not a Tango
Quantitative Finance
Level
2
What is a contango?
Futures price is below the spot price
Futures price is below the expected future spot price
Futures price is above the expected future spot price
Futures price is above the spot price
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1 solution
Investopedia defines Contango as :
"A situation where the futures price of a commodity is above the expected future spot price.
Contango refers to a situation where the future spot price is below the current price, and people are willing to pay more for a commodity at some point in the future than the actual expected price of the commodity.
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."