Forward Rate Agreement

This Issue in United States

Forward Rate Agreement (fra)

Concept of Forward Rate Agreement (fra) in the context of derivatives contract, by the International Swaps and Derivatives Association (ISDA): An OTC (over the counter) contract, similar to a future contract, but where the tenor of the contract is bespoke to that specific contract. On a future contract the tenor is fixed by the exchange.

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See Also

• Derivatives Contract

Concept of Forward Rate Agreement (FRA) in Futures Trading

In this context of financial law, the following is a definition of Forward Rate Agreement (FRA): An OTC forward contract on a short-term interest rate. The buyer of a FRA is a notional borrower, i.e., the buyer commits to pay a fixed rate of interest on some notional amount that is never actually exchanged. The seller of a FRA agrees notionally to lend a sum of money to a borrower. FRAs can be used either to hedge interest rate risk or to speculate on future changes in interest rates.