Forward rate agreement


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Forward rate agreement (FRA)

Agreement to borrow or lend at a specified future date at an interest rate that is fixed today.

Forward Rate Agreement

An agreement between two parties to exchange two currencies or interest rates at a given rate at some point in the future. A forward rate agreement mitigates foreign exchange risk or interest rate risk for the parties. It is most useful when both parties have operations or some other interest in a country using a given currency or investment vehicle with a floating interest rate. Forward rate agreements are over-the-counter contracts and are also called future rate agreements.
References in periodicals archive ?
Market participants scaled back expectations for an end to the Bank of Japan's accommodative monetary policy, with forward rate agreements suggesting expectations for virtually no change in policy through the end of 1997.
In contrast, turnover for foreign exchange swaps increased again, rising by 12%, while turnover for forward rate agreements rose by 4%.

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