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Foreign Exchange: The Complete Deal by James Sharpe

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6. Types of Foreign Exchange Transactions

In this section we will look at the following foreign exchange transactions:

  1. Spot
  2. Forward
  3. Broken date
  4. Non-deliverable forward (NDF)
  5. Swap
  6. Forward/forward
  7. Algorithmic trading
  8. Options

1. Spot

A spot transaction is the exchange of two currencies at an agreed rate for cash delivery (settlement). This means that transactions entered will be settled between the two contracting parties two business days later (except for transactions involving the Canadian dollar, which is settled one business day later) and is referred to as funds.

For example, a spot deal contracted on Monday will be settled on Wednesday and a spot deal contracted on Wednesday will be settled on Friday. A spot deal ...

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