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Pricing – Spot vs. Future

Pricing – Spot vs. Future

Spot/Cash Price Future Price
In the market place, the physical product , the ASSET is bought/sold On the exchange or OTC, DERIVATIVES of the physical product are traded
Either the activity is carried out over a public venue, or Future/swaps are priced for each month, and the series of prices represents the “forward curve”
A methodology is used to “discover” the prices ( and an index is published) The slope of the forward curve may be increasing: contango, or it may be decreasing: backwardation