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 ?
Three-month interest rates three months hence, as implied by forward rate agreements, ended the period at 3.59 percent, 42 basis points above June 30 levels.
Turnover in interest rate derivatives has increased since the mid-1990s, reflected in greater trading in forward rate agreements and interest rate swaps.
Implied yields on three-month forward rate agreements rose 15 basis points immediately after Chairman Greenspan's testimony.

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