Forward Rate Agreement


FRA. A forward contract that specifies an interest rate to be paid on an obligation beginning on some future date. Any gain or loss on the contract is treated as a similar gain or loss on a futures or options contract would be.

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Their forward rate agreement had them getting paid starting in the first quarter of next year and extending for four years.

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Mabel's federal student loans have a forward rate agreement that allows her to borrow money without interest until she graduates college, but then she must start paying back the money borrowed plus interest after graduation.

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FORWARD RATE AGREEMENT An over-the-counter contract between parties that determines the rate of interest, or the currency exchange rate, to be paid or received on an obligation beginning at a future start date. The contract will determine the rates to be used along with the termination date and notional value. On this type of agreement, it is only the differential that is paid on the notional amount of the contract.

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fraption over the counter derivative