What is meant by the conditional future spot rate?

Question

Quizplus · Accepted Answer

The conditional future spot rate refers to the conditional mean of the probability distribution of future spot rates, which is the expected spot rate at a future point in time, given certain conditions (such as the current spot rate, interest rates, etc.). This is different from the forward rate, which is a contractually agreed-upon rate for a future currency exchange, and from the forecasted future spot rate, which is a prediction based on various models and assumptions. The conditional variance of the probability distribution of future spot rates is also a relevant concept in finance, but it is not the same as the conditional future spot rate.

What Is Meant by the Conditional Future Spot Rate