A ________ is a transaction in which both a spot transaction and a forward transaction are agreed upon simultaneously.

Question

Quizplus · Accepted Answer

A swap is a derivative contract involving the exchange of cash flows between two parties. In a currency swap, the parties exchange notional amounts of different currencies and agree to reverse the exchange at a future date. This transaction involves both a spot component (the exchange of the notional amounts) and a forward component (the agreement to reverse the exchange at a future date). Therefore, a swap is the only choice that fits the description given in the question. Arbitrage is a strategy to take advantage of price differences in different markets, while calls and puts are options contracts that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specific price.

A ________ Is a Transaction in Which Both a Spot