Forward Contracts and Forward-Rate Agreements

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Forward Contracts and Forward-Rate Agreements - Article

Forward contracts fix today the terms of a transaction to be completed in future, while a **Forward Rate Agreement (FRA)** fixes an interest rate for a specified future period without normally exchanging the notional principal. This article explains forward payoff, forward pricing, premium or discount, FRA rate interpretation, interest differential, discounted FRA settlement, and the numerical distinctions most relevant for CAIIB BFM.

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