Backpricing

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DEFINITION of 'Backpricing'

A pricing method used in specific futures contracts whereby the price of the commodity to be delivered is priced by the purchaser at some future date after entering into the position.

BREAKING DOWN 'Backpricing'

The price at which the purchaser can set the deliverable commodity must be relative to any monthly or periodic price found in the futures market for that particular actual.

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    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
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    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
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    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
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