ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Transactions where the exchange of currencies takes place two days after the date of the contact are known as the Spot transactions. The rate of exchange effective for the spot transaction is known as the spot rate and the market for such transactions is known as the spot market.

Detailed explanation-2: -Unlike a transfer between two different currency accounts, a real-time rate is applied to a foreign exchange transaction. The settlement period for spot transactions is usually two days (T+2) from the date of entering the transaction.

Detailed explanation-3: -In trading, spot refers to the price of an asset for immediate delivery, or the value of an asset at any exact given time. It differs from an asset’s futures price, which is the price for delivery at some date in the future, or its expected price. Any asset that can be traded as a future can be quoted as a spot price.

Detailed explanation-4: -A spot date is the day the transaction settles as opposed to the day the trade is executed. The term is most frequently found in reference to forex trades.

Detailed explanation-5: -Forward price The price of an instrument that settles later than the spot is a mix of the spot price and the interest value before the settlement date.