The difference between spot, forward and future contract.

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Answer 1

Question

Chapter 10, Problem 1DYU

Summary Introduction

To discuss: The difference between spot, forward and future contract.

Expert Solution & Answer

Explanation of Solution

Spot contract:

Spot contract is a contract in which purchasing and selling of currency, commodity, or security for sudden settlement on the spot date. Which is usually two business days after the transaction date.

Future contract:

Future contract is a standardized contract of buying and selling of underlying asset in a specified price and particular time in future.

Forward contract:

Forward contract is an agreement between parties to buy or sell an underlying asset in future at a specified date, and certain price.

The main differences between spot forward and future contract is as follows:

*Spot contract*	*Forward contract*	*Future contract*
It is used to merchandise the commodity.	It is used to hedge against the price changes	It is used to hedge against the price changes
Trades in uneven amounts	Specified amount	Predetermined amount
There is a sudden settlement	On maturity	On a daily basis
Immediate contract	Customized contract	Standardized contract
No need of collateral	Collateral not required	Initial margin needed
Self-regulated	Self-regulated	Stock exchange

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Answer 2

Question

Chapter 10, Problem 1DYU

Summary Introduction

To discuss: The difference between spot, forward and future contract.

Expert Solution & Answer

Explanation of Solution

Spot contract:

Spot contract is a contract in which purchasing and selling of currency, commodity, or security for sudden settlement on the spot date. Which is usually two business days after the transaction date.

Future contract:

Future contract is a standardized contract of buying and selling of underlying asset in a specified price and particular time in future.

Forward contract:

Forward contract is an agreement between parties to buy or sell an underlying asset in future at a specified date, and certain price.

The main differences between spot forward and future contract is as follows:

*Spot contract*	*Forward contract*	*Future contract*
It is used to merchandise the commodity.	It is used to hedge against the price changes	It is used to hedge against the price changes
Trades in uneven amounts	Specified amount	Predetermined amount
There is a sudden settlement	On maturity	On a daily basis
Immediate contract	Customized contract	Standardized contract
No need of collateral	Collateral not required	Initial margin needed
Self-regulated	Self-regulated	Stock exchange

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Answer 3

Question

Chapter 10, Problem 1DYU

Summary Introduction

To discuss: The difference between spot, forward and future contract.

Expert Solution & Answer

Explanation of Solution

Spot contract:

Spot contract is a contract in which purchasing and selling of currency, commodity, or security for sudden settlement on the spot date. Which is usually two business days after the transaction date.

Future contract:

Future contract is a standardized contract of buying and selling of underlying asset in a specified price and particular time in future.

Forward contract:

Forward contract is an agreement between parties to buy or sell an underlying asset in future at a specified date, and certain price.

The main differences between spot forward and future contract is as follows:

*Spot contract*	*Forward contract*	*Future contract*
It is used to merchandise the commodity.	It is used to hedge against the price changes	It is used to hedge against the price changes
Trades in uneven amounts	Specified amount	Predetermined amount
There is a sudden settlement	On maturity	On a daily basis
Immediate contract	Customized contract	Standardized contract
No need of collateral	Collateral not required	Initial margin needed
Self-regulated	Self-regulated	Stock exchange

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Answer 4

Question

Chapter 10, Problem 1DYU

Summary Introduction

To discuss: The difference between spot, forward and future contract.

Expert Solution & Answer

Explanation of Solution

Spot contract:

Spot contract is a contract in which purchasing and selling of currency, commodity, or security for sudden settlement on the spot date. Which is usually two business days after the transaction date.

Future contract:

Future contract is a standardized contract of buying and selling of underlying asset in a specified price and particular time in future.

Forward contract:

Forward contract is an agreement between parties to buy or sell an underlying asset in future at a specified date, and certain price.

The main differences between spot forward and future contract is as follows:

*Spot contract*	*Forward contract*	*Future contract*
It is used to merchandise the commodity.	It is used to hedge against the price changes	It is used to hedge against the price changes
Trades in uneven amounts	Specified amount	Predetermined amount
There is a sudden settlement	On maturity	On a daily basis
Immediate contract	Customized contract	Standardized contract
No need of collateral	Collateral not required	Initial margin needed
Self-regulated	Self-regulated	Stock exchange

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Answer 5

Chapter 10, Problem 1DYU

Summary Introduction

To discuss: The difference between spot, forward and future contract.

Expert Solution & Answer

Explanation of Solution

Spot contract:

Spot contract is a contract in which purchasing and selling of currency, commodity, or security for sudden settlement on the spot date. Which is usually two business days after the transaction date.

Future contract:

Future contract is a standardized contract of buying and selling of underlying asset in a specified price and particular time in future.

Forward contract:

Forward contract is an agreement between parties to buy or sell an underlying asset in future at a specified date, and certain price.

The main differences between spot forward and future contract is as follows:

*Spot contract*	*Forward contract*	*Future contract*
It is used to merchandise the commodity.	It is used to hedge against the price changes	It is used to hedge against the price changes
Trades in uneven amounts	Specified amount	Predetermined amount
There is a sudden settlement	On maturity	On a daily basis
Immediate contract	Customized contract	Standardized contract
No need of collateral	Collateral not required	Initial margin needed
Self-regulated	Self-regulated	Stock exchange

Answer 6

Chapter 10, Problem 1DYU

Summary Introduction

To discuss: The difference between spot, forward and future contract.

Expert Solution & Answer

Explanation of Solution

Spot contract:

Spot contract is a contract in which purchasing and selling of currency, commodity, or security for sudden settlement on the spot date. Which is usually two business days after the transaction date.

Future contract:

Future contract is a standardized contract of buying and selling of underlying asset in a specified price and particular time in future.

Forward contract:

Forward contract is an agreement between parties to buy or sell an underlying asset in future at a specified date, and certain price.

The main differences between spot forward and future contract is as follows:

*Spot contract*	*Forward contract*	*Future contract*
It is used to merchandise the commodity.	It is used to hedge against the price changes	It is used to hedge against the price changes
Trades in uneven amounts	Specified amount	Predetermined amount
There is a sudden settlement	On maturity	On a daily basis
Immediate contract	Customized contract	Standardized contract
No need of collateral	Collateral not required	Initial margin needed
Self-regulated	Self-regulated	Stock exchange

Answer 7

Chapter 10, Problem 1DYU

Summary Introduction

To discuss: The difference between spot, forward and future contract.

Answer 8

Expert Solution & Answer

Explanation of Solution

Spot contract:

Spot contract is a contract in which purchasing and selling of currency, commodity, or security for sudden settlement on the spot date. Which is usually two business days after the transaction date.

Future contract:

Future contract is a standardized contract of buying and selling of underlying asset in a specified price and particular time in future.

Forward contract:

Forward contract is an agreement between parties to buy or sell an underlying asset in future at a specified date, and certain price.

The main differences between spot forward and future contract is as follows:

*Spot contract*	*Forward contract*	*Future contract*
It is used to merchandise the commodity.	It is used to hedge against the price changes	It is used to hedge against the price changes
Trades in uneven amounts	Specified amount	Predetermined amount
There is a sudden settlement	On maturity	On a daily basis
Immediate contract	Customized contract	Standardized contract
No need of collateral	Collateral not required	Initial margin needed
Self-regulated	Self-regulated	Stock exchange