What is the difference between a spot transaction and a forward transaction in the$$ foreign$-$exchange market?

A

$$

$$

spot

forward

transaction is trade

todaytoday$,$

and a

$$

$$

spot

forward

transaction is trade

in the futurein$$the$$future$.$

Part $2$

What are the key differences between$$ foreign$-$exchange forward contracts and$$ foreign$-$exchange futures$$ contracts?

$$

$$

Forward

Futures

contracts are private agreements among traders to exchange any amount of currency on any future$$ date,

while

$$

$$

forward

futures

contracts are traded on exchanges and are$$ standardized, including a stated settlement date.

Part $3$

With

$$

$$

futures

forward

$$contracts$,$ the exchange rate changes continually as contracts are bought and sold on the$$ exchange, and with

$$

$$

futures

forward

$$contracts$,$ the exchange rate is fixed at the time the contract is agreed to$.$

Part $4$

Why are forward contracts more widely used in the$$ foreign$-$exchange market than are futures$$ contracts?

Forward contracts are used $10$ times more than futures contracts because the counterparty risk between big banks is relatively

$$

$$

low

high

$,$

and these banks value the

$$

$$

flexibility

rigidity

of the forward contract.$$