en     ru     jp
 
 
private banking
private banking
private banking
private banking
private banking
private banking
private banking
     
 
Home
      
Knowledge Base
      
Equity Derivatives and Structured Products Glossary
      
Forward rate agreement
       
 
Back

Forward rate agreement

 Search definitions     
  Search  

Forward rate agreement
A Forward rate agreement (FRA) allows purchasers/sellers to fix the Interest rate for a specified period in advance. One party pays fixed, the other an agreed Variable Rate. Maturities are generally out to two years and are priced off the Underlying Yield curve. The transaction is done on a nominal amount and only the difference between contracted and actual rates is paid. If rates have risen by the time of the agreement’s maturity, the purchaser receives the difference in rates from the seller and vice versa. A Swap is therefore a Strip of FRAs. FRAs are off-Balance Sheet – there are no up-front or Margin payments and the Credit risk is limited to the Mark-to-market value of the transactions. Unlike Interest rate swaps, FRAs settle at the beginning of the Interest period, two business days after the calculation date.
Posted by  Privatebanking.com
 
  Back  
  Print  
  Email  

 

private banking
Get Adobe Flash Player to view the media
FlashPlayer required to view the media
private banking
private banking
private banking
private banking
private banking

 
Home News Library Newsletters Event Calendar Advertise About Contact FAQ
Privacy Policy     Terms of Service
 

©