Backwardation. (a) On the Stock Exchange a percentage charge paid by the seller of securities for the right to delay delivery. For example, if a bear has 'sold short', and the price does not fall within the period of the Stock Exchange Account, he may pay a backwardation to carry his bargain forward to the next settlement in the hope that the price will fall as expected. (b) In a commodity market, the amount by which the spot price (and the costs of carrying the commodity over time) exceeds the forward price.
Bagehot, Walter (1826-77), English economist, lawyer and banker. Educated at London University, called to the bar in 1852, but soon afterwards joined his father in banking. From i86o to 1877 he was editor of The Economist, and his Lombard Street (1873), based on a collection of articles he wrote for that magazine, is an observant examination of finance and banking. His other main works, Universal Money(1869) and Postulates of English Political Economy (1876), show him as a moderate critic of the methodology of the classical school of political economy. His concept of a psychological cycle of optimism and pessimism was an early attempt to explain the trade cycle.
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