ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A forward trade is any trade that settles further in the future than a spot transaction. The forward price is a combination of the spot rate plus or minus forward points that represent the interest rate differential between the two currencies.

Detailed explanation-2: -C is correct. An agreement to convert one currency into another in the future is a foreign exchange transaction that involves the forward market.

Detailed explanation-3: -What Is a Futures Market? A futures market is an auction market in which participants buy and sell commodity and futures contracts for delivery on a specified future date. Futures are exchange-traded derivatives contracts that lock in future delivery of a commodity or security at a price set today.

Detailed explanation-4: -Three are three key types of forex markets: spot, forward, and futures.

Detailed explanation-5: -Prices in the forward market are interest-rate based. In the foreign exchange market, the forward price is derived from the interest rate differential between the two currencies, which is applied over the period from the transaction date to the settlement date of the contract.