Cash Price

Posted in Finance, Accounting and Economics Terms, Total Reads: 353

Definition: Cash Price

Also known as spot price, it is the amount of money that exchanges hand when any actual or physical commodity is bought / sold. It includes all transaction, carry as well as transportation costs. It is different from futures price as it is the price paid for commodities in the spot market. Returns from commodity futures are anticipated cash prices. These commodities are highly homogenous with no product differentiation at all.

It is also used to calculate the basis risk as follows –

Cash Price - Futures Price = Basis at a specific point in time

The cash price is for a specific location, time, and quality of product.



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