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The spot date may be different for different types of financial transactions. In the foreign exchange market, spot is normally two banking days forward for the currency pair traded. A transaction which has settlement after the spot date is called a forward or a forward contract. Other settlement dates are also possible.
In a spot market, settlement normally happens in T+2 working days, i.e., delivery of cash and commodity must be done after two working days of the trade date. [1] A spot market can be through an exchange or over-the-counter (OTC). Spot markets can operate wherever the infrastructure exists to conduct the transaction.
The interbank market is an important segment of the foreign exchange market. It is a wholesale market through which most currency transactions are channeled. It is mainly used for trading among bankers. The three main constituents of the interbank market are: the spot market; the forward market
Conversely, in markets with easily accessible spot prices or basis rates, in particular the Foreign exchange market and OIS market, forwards are usually quoted using premium points or forward points. That is using the spot price or basis rate as reference forwards are quoted as the difference in pips between the outright price and the spot ...
Both forward and spot rates tend to act as navigation tools in the diverse world of investments. Primarily, the forward rate indicates forecasted interest rates, while the spot rate provides the ...
The forward market is the informal over-the-counter financial market by which contracts for future delivery are entered into. It is mainly used for trading in foreign currencies, where the contracts are used to hedge against foreign exchange risk. [1] [2] Commodities are also traded on forward markets.
The forward exchange rate is determined by a parity relationship among the spot exchange rate and differences in interest rates between two countries, which reflects an economic equilibrium in the foreign exchange market under which arbitrage opportunities are eliminated. When in equilibrium, and when interest rates vary across two countries ...
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