Spot and forward contracts

Spot and forward contracts are financial tools used to buy or sell assets like currencies or commodities. A spot contract is an agreement to exchange an asset immediately at current market prices, settling typically within two days. A forward contract, on the other hand, is a customized agreement between two parties to buy or sell an asset at a predetermined price on a future date. While spot contracts reflect current market conditions, forward contracts lock in prices for future transactions, helping manage risk against price fluctuations. Both are essential tools for businesses and investors managing exchanges over different time frames.