An example is a company that wants to buy orange juice immediately. He will pay the cash price and will have it delivered within two days. On the other hand, if the company wants orange juice to be available in stores in December, it cannot make a cash purchase for the risk that the juice will become bad. As juice is needed in months, a contract at the front is more sensible. Spot buying is often considered 180 from strategic sourcing. While strategic purchases involve long-term purchase obligations, cash purchases (or cash purchases) occur when the purchase is immediate and a purchase must be made literally “on the spot.” These purchases are usually unplanned, consist of small orders, and often paid immediately. The price and availability of delivery times are the main factors taken into account in a tactical purchasing decision, as purchases are made on the basis of need. Each transaction is treated as a separate event and generally follows a short-term approach. For most organizations, strategic procurement accounts for the bulk of purchases. These purchases are purchases that are planned in advance, that take into account the requirements of the company and supplier capabilities, and that generally have long delivery times. What is a spot contract? A cash contract is a document that has the purchase or sale of a currency, security or merchandise for quick delivery and payment for the date of the spot, which is about two days after the trading date. The spot price is the listed listed price for the processing of the spot contract.
Keep in mind that a spot rate curve is not a yield-ytm or swap rate curve – which are actually current trading price curves for securities at different maturities (this would be: yield curve, swap curve, cash curve or coupon curve). Spot prices cannot be observed directly, prices can be: spot prices are therefore estimated from these prices by the bootstraping method, and the result is the spot rate curve for the securities concerned. The spot date may be different for different types of financial transactions. On the foreign exchange market, Spot is normally two days in advance of the bank for the currency pair traded. A booking that has been cancelled after the spot date is called a futures or futures contract. Depending on the item traded, spot prices may show market expectations of future movements. In the case of a safety product or non-perishable products (for example. B silver), the spot price reflects market expectations of future price movements. In theory, the difference between spot and forward prices should be equal to the cost of financing, plus any gains against the warranty holder, based on the costs of the carry model.
In the case of an action. B, the price differential between spot and forward is generally almost entirely attributable to the dividends payable during the period, net of the interest payable on the purchase price. Any other entry price would give a chance for arbitration and a risk-free gain (see the rational pricing of the mechanics of arbitration). In finance, the booking date is the normal billing date on which the booking is completed today. This type of transaction is called spot or simply spot transaction. Cash contracts can be a high-risk strategy for businesses because exchange rates are volatile in a short period of time. For example, if, in three months, a British company ordered euros from Germany for a payment in three months and used the cash contract to pay an invoice in three months, that company may lose money if the exchange rates are not favourable. The risk can reduce profits or even cause losses as a result of the original agreement.
A futures contract or option is more advantageous. Cash purchases or cash purchases are usually necessary when there is an immediate need for a good or service. These purchases are sometimes emergency purchases – maybe the office printer has printed his last paper, or maybe the elevator is no longer working, and you have an employee on crutches