Structure Of Forward Rate Agreement

The format in which the FR is recorded is the duration until the settlement date and the duration until the due date, expressed in months and usually separated by the letter “x”. The rate difference results from the comparison between the fra interest rate and the settlement rate. It is calculated as follows: as indicated above, the settlement amount is paid in advance (at the beginning of the contract term), while interbank rates such as LIBOR or EURIBOR apply to late payment interest transactions (at the end of the credit term). To take this into account, the interest rate difference must be discounted, with the settlement rate being used as the discount rate. . . .

No Comments:

Add a Comment

Comments are closed.

Call Now Button