Filter by Categories
Accounting
Banking

Derivatives




FRA Rate


The interest rate at which a forward rate agreement (FRA) is traded. In other words, it is the agreed rate of interest at which a notional cash amount (FRA notional) will be borrowed or lent for a period of time up to a year, commencing any time over the course of 12 months. The settlement amount of an FRA (which is paid by one party to the other on the settlement date) is the difference between the FRA rate and the reference rate expressed as a percentage of the notional amount.

In general, it is a function of the 3-month LIBOR rate. A rise in this rate will cause FRA rates to rise, and vice versa.

It is also known as the contract rate of an FRA.



ABC
Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
Watch on Youtube
Remember to read our privacy policy before submission of your comments or any suggestions. Please keep comments relevant, respectful, and as much concise as possible. By commenting you are required to follow our community guidelines.

Comments


    Leave Your Comment

    Your email address will not be published.*