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Derivatives

  Derivatives   |   Terms
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  • April 6, 2021
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Forward Rate Agreement

FRA, for short, is an over-the-counter (OTC) 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 a floating rate (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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