Spot, Forward, and Parity Markets

Spot, forward, and parity markets describe how currencies are priced for immediate settlement, future settlement, and interest-rate-linked parity relationships. This branch helps readers separate spot exchange-rate evidence from forward contracts, non-deliverable forwards, and parity logic.

Use these pages when an FX question depends on settlement timing, forward pricing, rate differentials, or whether a quoted relationship is an executable trade, a hedge input, or a theoretical parity benchmark.

What This Branch Covers

Decision Lens

Start by identifying the settlement date. A spot rate answers a near-term conversion question; a forward rate answers a future settlement or hedge question; parity compares whether spot, forward, and interest-rate inputs are internally consistent.

Evaluation Checklist

• Confirm the currency pair, quote direction, and settlement date.
• Distinguish spot, forward, all-in forward, and non-deliverable forward references.
• Check whether a parity discussion is theoretical, model-based, or tied to an actual hedge.
• Match the rate to the record: quote screen, trade confirmation, hedge document, invoice, or valuation model.
• Treat examples as educational context, not as trading or hedging advice.

Common Mistakes

• Using a spot quote for a future cash flow without considering forward points or hedge terms.
• Treating a forward rate as a forecast rather than a contract or pricing relationship.
• Comparing deliverable and non-deliverable forwards as if settlement mechanics are identical.
• Applying parity language without checking the interest-rate inputs and transaction costs.

In this section

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