The payment made by a speculator to the buyer w... - JAMB Commerce 2023 Question
The payment made by a speculator to the buyer when he is unable to deliver stocks on the agreed date is
A
contango
B
arbitrage
C
backwardation
D
franco
correct option: c
Backwardation refers to a situation in financial markets where the current price of an underlying asset is higher than prices trading in the futures market. When a speculator cannot deliver the stocks on the agreed date, a payment may be made to the buyer, which is related to the concept of backwardation, as the speculator would need to settle the position at potentially unfavorable current market prices.
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