ABSTRACT
Spot and forward contracting occur in markets that are known as over the counter. A spot transaction is one in which two parties engage in a transaction for immediate or nearly immediate delivery of some commodity. The spot market is the market in which spot transactions take place. The spot market is just the set of all spot transactions. The ability to contract in forward markets is the second way that one can purchase a commodity. The forward market is the market in which forward transactions take place. It is an abstract entity. The forward market is just the set of all forward transactions. The basic problem with forward markets appears to be the lack of an exit mechanism. If market participants could somehow fulfill their financial obligations and exit the market before the delivery date, then they would have the best of both worlds.
