An agreement to exchange currencies at some point in the future using an exchange rate agreed upon today is called a ________ trade.

Question

Quizplus · Accepted Answer

A forward trade involves an agreement between two parties to exchange currencies at a future date using an exchange rate agreed upon today. This allows the parties to hedge against currency fluctuations and lock in a future exchange rate. Spot trades involve the immediate exchange of currencies at the current exchange rate, while swap trades involve the simultaneous purchase and sale of currencies with an agreement to reverse the transaction at a later date. Floating trades do not exist within the context of currency exchange. Triangle trades involve three currencies and are not relevant to this question.

An Agreement to Exchange Currencies at Some Point in the Future