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Derivatives

  Derivatives   |   Terms
  • 1509
  • April 20, 2020
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FRA

It stands for forward rate agreement which is an over-the-counter agreement to apply a certain interest rate to either lending or borrowing a specified principal amount during a predetermined future period. The contract is designed on an underlying assumption that the lending or borrowing would be usually effected at LIBOR rate. A forward rate agreement differs from a swap because in the former a payment is made only once at maturity, whilst in the latter a set of payments are made on specific reset dates.


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