File talk:Contangobackwardation.png

I think there is a problem with this graph. Here (http://www.wikicfo.com/Wiki/Contango.ashx) it says: "Contango is a term used to describe the forward yield curve when it is upward sloping"

Here (http://www.riskglossary.com/link/backwardation.htm) also: "Contango is a condition where forward prices exceed spot prices, so the forward curve is upward sloping"

???
 * No. The curve is in fact correct. But what it depicts is not clearly explained. What is shown is the evolution of the forward price (of a future) and the expected spot price for a given maturity as the current date approaches the maturity date. So, for if today you want to buy a future for a year from now in market in contango, you will pay more than the expected spot price, say 10% (ouch!). But in three months from now, closer to the maturity date, you will pay only 7.5% above the expected spot price for a future maturing in nine months. Six months from today, you will pay 5% over for delivery 6 months later then nine months from today, 2.5% above for delivery 3 months later, and so on until you. The closer you get to a delivery date, the more the future for this date is supposed to converge to the expected spot price. Hence the slope for a given maturity over time is down in a contango. Same for a backwardated market, the slope for a given maturity is up. Hope this help.
 * Arugia (talk) 21:37, 2 July 2012 (UTC)

Tnx, it helped. It is not so straightforward, and every single word is very important... — Preceding unsigned comment added by 161.53.202.225 (talk) 08:55, 4 July 2012 (UTC)