Spot and forward rates

To some people these concepts are more easily understood as cash rates and futures. As a matter of fact we would not like to use the term "futures" here as this may lead to confusion with the typical futures contracts. Instead, let us use a more descriptive approach. A spot rate is the exchange rate which is valid for a transaction (purchase of currency A and sale of currency B) that must be concluded within the next two working days. Thus the value date (i.e. the day of actual delivery of currencies) of a transaction performed on a Monday is Wednesday. For Thursday it is Monday (weekend days are not counted). On the other hand, a forward transaction regards a deal which is concluded today and actual effect will take place on a fixed future date In the next paragraph we describe the relationship between a spot and a forward rate.