Spot Rates and Forward Rates A spot rate is the current market price for a particular interest rate instrument, such as a bond or a loan. It is the pric...
Spot Rates and Forward Rates
A spot rate is the current market price for a particular interest rate instrument, such as a bond or a loan. It is the price paid in the current spot market for a particular quantity of an instrument.
A forward rate is a contract to buy or sell an instrument at a specified future date and price. It is the price paid in the forward market for a particular quantity of an instrument.
Spot rates and forward rates are used in financial instruments to hedge against market risk and to speculate on future price movements. They are also used by investors and financial institutions to trade and manage fixed-income portfolios