Please see “Spot Exchange Rate” article by Alexander Calvo for reference to an explanation of the Spot Exchange Rate. As we learned on that article, the spot rate is the “current” rate both firms agree to exchange currencies usually within 24 or 48 hours. On the other hand, Forward Exchange Rate is a rate quoted today for an exchange between two firms that will occur in the future. Usually the delivery or payment on the exchange is done within 30, 90 or 180 days.

Forward rates can be defined as a fixed price given for buying a currency today to be delivered in the future, for example in three months' time, used in international trade to avoid the extra costs that could occur if the exchange rate changes the way the market is feeling about the future movements of interest rates. Spot exchange rates: Also known as "benchmark rates", "straightforward rates" or "outright rates", spot rates represent the price that a buyer expects to pay for a foreign currency in another currency. Spot rates use prices of the securities currently trading on the market.

The foreign exchange market is an electronically linked network of banks, foreign exchange brokers and dealers who facilitate trading by converting one currency to another currency. Most currency transactions are channeled through the worldwide interbank market, this is a wholesale market where major banks trade with one another. This market often referred to as the foreign exchange market makes it easier for importers and exporters to convert their money to their home currency.

DefinitionThe Spot Market is commodities or a securities market, in which goods are sold for cash, and are effective immediately. These transactions are recorded right away, or within the second business day. These goods can be perishable or non-perishable.   Spot Quotations

DefinitionUnlike a spot market, the forward market are transactions that take place at a future date. The participants within the market are: arbitrageurs, speculators and hedgers.  Forward Contract