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  • November 7, 2022
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Contango Swap

A commodity swap in which one counterparty pays a rate based on the current difference between the spot price and a six-month futures price. As a result, this counterparty is said to have locked in a spread over the sport rate, being protected from a potential flattening or inverting of the yield curve. In return, the other counterparty pays the spot rate plus a preset margin.

This swap is principally designed to protect investors from a change in a forward market. It is the opposite of a backwardation swap.


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