Forward thinking for backwardation

A common assumption among energy operators and risk managers is that today's futures price embodies the market expectations of the spot price in the future. The standard practice for risk managers is the use of the current futures market to calculate mark-to-market (MTM) and value-at-risk (VAR). While we would not question this conventional use of forward curves, it should be noted that the application of this assumption to manage portfolios and estimate costs or earnings over longer simulat

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