The spot exchange rate is determined by the relationship between supply and demand of money at the time of spot delivery. The exchange rate listed in the general foreign exchange market generally refers to the spot exchange rate, except the forward exchange rate.
The delivery period of foreign exchange transactions can be divided into spot exchange rate and forward exchange rate. The so-called delivery means that the buyer and the seller perform the transaction contract, giving and receiving money and goods. The delivery of foreign exchange transactions refers to the behavior that the buyer pays the domestic currency and the seller pays the foreign exchange. Due to different delivery dates, the exchange rate is different.
Spot exchange rate, also known as spot exchange rate, is the exchange rate used by buyers and sellers for foreign exchange delivery within two business days after the transaction.
Forward exchange rate, also known as forward exchange rate, is the exchange rate agreed by buyers and sellers in advance for foreign exchange delivery on a certain date in the future.
In forward foreign exchange transactions, there are generally several trading methods, namely:
Direct forward foreign exchange trading: refers to trading directly in the forward foreign exchange market without corresponding trading in other markets. Banks usually don't quote the forward exchange rate in full, but use the difference between the forward exchange rate and the spot exchange rate, that is, the basis point quotation. The forward exchange rate may be higher or lower than the spot exchange rate.
Forward foreign exchange trading based on options: companies or enterprises usually don't know the exact date of their foreign exchange income in advance. Therefore, foreign exchange options can be traded with banks, which gives enterprises the right to execute forward contracts within a certain period after the trading date, such as 5-6 months. Forward foreign exchange transactions combining spot and forward. Forward trading quotation
In forward foreign exchange transactions, foreign exchange quotation is more complicated. Because the forward exchange rate is not the realized exchange rate that has been delivered or is being delivered, but the forecast of future exchange rate changes based on the spot exchange rate. We will introduce it in the later analysis of difficulties. Expression of basic terms