A _____ includes both a spot exchange of two currencies and an agreement to reverse the exchange at a specified future date.
A) combination exchange transaction
B) foreign exchange swap
C) reverse forward swap
D) forward exchange contract

Question

A _____ includes both a spot exchange of two currencies and an agreement to reverse the exchange at a specified future date.
A)    combination exchange transaction
B)    foreign exchange swap
C)    reverse forward swap
D)    forward exchange contract

BlackTom AI · Accepted Answer

The question asks to identify the term that describes a transaction which combines a spot currency exchange with an agreement to reverse the exchange at a future date.
Given the stem includes four labeled possibilities, we can evaluate each in turn to see which fits the described structure.
Option A: 'combination exchange transaction' — This label is not a standard term in FX markets for a transaction combining spot and a reversal at a future date. It sounds generic and does not denote the specific mechanism of a spot exchange paired with a reversal agreement, so it is unlikely to be correct.
Option B: 'foreign exchange swap' — This instrument precisely matches the description: one leg involves a spot exchange of currencies, and the other leg is an agreement to reverse at a specified future date (the forward leg). The swap settles in two stages, with an initial spot transaction and a parallel forward contract, fulfilling the requirement. This is the correct characterization.
Option C: 'reverse forward swap' — This term is not a standard or widely used designation for the described structure. It suggests a reversal or a forward arrangement but lacks the canonical naming and may confuse with other forward- or swap-related concepts. Therefore, it does not accurately describe the instrument.
Option D: 'forward exchange contract' — A forward exchange contract typically covers a forward (future) delivery of currencies without the initial spot exchange component that characterizes a swap. Since it omits the spot leg, this option fails to capture the complete structure described in the question.
Note on the provided data: the answer_options field in the input is empty, so the analysis above uses the explicit wording from the question stem to reconstruct plausible options A through D for evaluation. If actual option text differs in the source, the same reasoning approach applies: assess whether the instrument includes both an initial spot exchange and a parallel reversal agreement at a future date, which is the hallmark of a foreign exchange swap.
In summary, the item that aligns with the description of a spot exchange plus a reverse-exchange agreement at a future date is the instrument commonly called a foreign exchange swap, since it combines both legs into a single contract structure.

ECON:3345:0001 Spr25 Quiz 7 Chs. 17, 18 & 19

A _____ includes both a spot exchange of two currencies and an agreement to reverse the exchange at a specified future date. A) combination exchange transaction B) foreign exchange swap C) reverse forward swap D) forward exchange contract

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