A spot transaction is one in which an order to buy or sell a currency is placed today, at a price determined today, and with settlement of the transaction taking place two working days from today.

FOREIGN CURRENCY MARKETS

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	True
B	False
C	Either A or B
D	None of the above

Explanation:

Detailed explanation-1: -A spot trade, also known as a spot transaction, refers to the purchase or sale of a foreign currency, financial instrument, or commodity for instant delivery on a specified spot date.

Detailed explanation-2: -The settlement period for spot transactions is usually two days (T+2) from the date of entering the transaction. To hedge the exchange rate to a future date, it is possible to enter an FX forward contract.

Detailed explanation-3: -Spot Market and Exchanges The New York Stock Exchange (NYSE) is an example of an exchange where traders buy and sell stocks for immediate delivery. This is a spot market.

Detailed explanation-4: -A spot exchange rate is the current price at which a person could exchange one currency for another, for delivery on the earliest possible value date. Cash delivery for spot currency transactions is usually the standard settlement date of two business days after the transaction date (T+2).

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ECONOMICS (CBSE/UGC NET)

ECONOMICS

FOREIGN CURRENCY MARKETS