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Spot Exchange Rates

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Spot exchange rates

Spot Exchange Rate
The exchange rate for which two parties agree to trade two currencies at the present moment. The spot exchange rate is usually at or close to the current market rate because the transaction occurs in real time and not at some point in the future. Some analysts believe that forward rates are an accurate predictor of future spot rates, though many others dispute this. See also: Forward exchange.


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Next, using continuously recorded observations for the deutschemark/dollar and yen/dollar spot exchange rates covering more than a decade, they find that forecasts from a simple long-memory Gaussian vector autoregression for the logarithmic daily realized volatilities perform admirably compared to popular daily ARCH and related models.
Option contracts are more expensive, but allow firms to let the option lapse and therefore benefit from spot exchange rates if these are more favourable.
That notion was extended to hedges of foreign-currency instruments remeasured at current spot exchange rates with the resulting gain or loss reported in earnings.
 
 
 
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