An agreement to trade currencies based on the exchange rate today for settlement within two business days is called a(n) _____ trade.

Question

Quizplus · Accepted Answer

The description matches that of a spot trade, which is an agreement to trade currencies at the current exchange rate for settlement within two business days. Swaps involve exchanging currencies at the spot rate and then reversing the exchange at a future date, while options and futures involve a contract for a future exchange of currencies at a predetermined rate. Forward trades also involve a contract for a future exchange of currencies, but the exchange rate is determined at the time the contract is made, not at the current exchange rate.

An Agreement to Trade Currencies Based on the Exchange Rate