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What is backwardation? is a cooked quant interview question on finance.
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This is a straightforward definitional question testing whether you understand a core concept in futures and commodity trading. Backwardation describes a specific relationship between spot and forward prices, and recognizing it is essential for trading, risk management, and understanding market structure.
The question asks you to articulate what backwardation means and how it differs from contango. To answer it well, you should be able to explain the price relationship clearly, describe when and why markets enter backwardation, and touch on the economic drivers (such as convenience yield or immediate supply scarcity). Interviewers use this to confirm you have internalized the mechanics of forward markets and can speak about them with precision.