Which of the following statements is true?
A) In a spot contract the buyer and seller enter into a contract at time 0, the contract is marked-to-market, the seller agrees on a price at time 0 and the bonds is delivered by the seller to the buyer 'at that time'.
B) In a spot contract the buyer and seller agree on a price at time 0 and the bonds is delivered by the seller at a future point in time, e.g. after three months.
C) In a spot contract the buyer and on a daily basis, and the buyer pays the spot price quoted at expiry.
D) None of the listed options are correct.

Question

Quizplus · Accepted Answer

In a spot contract, the buyer and seller enter into a contract at time 0 (the present moment), and the asset (in this case a bond) is delivered by the seller to the buyer "at that time," i.e. immediately. The contract is marked-to-market, meaning the value of the contract is adjusted each day to reflect changes in the market value of the asset. Option B refers to a futures contract, while option C describes a variation of a spot contract called a rolling spot contract.

Which of the Following Statements Is True