In
finance
Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...
, the spot date of a transaction is the normal settlement day when the transaction is carried out as soon as practical, i.e. "on the spot".
[UNDERSTANDING ACCOUNTING AND FINANCE: THEORY AND PRACTICE]
p.401
/ref> This kind of transaction is called a "spot transaction" or simply "spot", and is often described as such in contrast to a transaction which is not settled immediately, such as a ''futures contract
In finance, a futures contract (sometimes called futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The item tr ...
'' or a ''forward contract
In finance, a forward contract, or simply a forward, is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed on in the contract, making it a type of derivative instrument.John C Hu ...
''.
Settlement date
The spot settlement date may be different for different types of financial transactions, based on market practice. For example, in the foreign exchange market
The foreign exchange market (forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. By trading volume, ...
, spot is normally two banking days forward for the currency pair traded.
image:OptionsTimeline.GIF
Other settlement dates are also possible. Standard settlement dates are calculated from the spot date. For example, a one-month foreign exchange forward settles one month after the spot date—i.e., if today is 1 February, the spot date is 3 February and the one-month date is 3 March, assuming these dates are all business days. For a trade with two dates, such as a foreign exchange swap, the first date is usually taken as the spot date.
See also
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References
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Financial markets
Bond valuation
Swaps (finance)
Settlement (finance)