Forward Rate Agreement Ausgleichszahlung

The actual description of an interest rate agreement in advance (FRA) is a cash-for-difference derivative contract between two parties, which is compared to an interest rate index. This index is usually an interbank supply rate (IBOR) with a fixed maturity in different currencies, for example. B LIBOR in USD, GBP, EURIBOR in EUR or STIBOR in SEK. A FRA between two counterparties requires a fixed interest rate, a nominal amount, a chosen interest rate index maturity and a date that must be fully specified. [1] where N {displaystyle N} is the fiction of the contract, R {displaystyle R} the fixed rate, r {displaystyle r} the published IBOR fixing rate and d {displaystyle d} the decimalized dawn on which the starting and ending data of the IBOR rate extend. For USD and EUR, an ACT/360 convention follows and the GBP is followed by an ACT/365 convention. The cash amount is paid at the beginning of the value applicable to the interest rate index (depending on the currency in which the FRA is traded, either immediately after or within two working days of the published IBOR fixed rate). Many banks and large corporations will use FRAs to hedge future interest rate or foreign exchange risks. The buyer insures against the risk of rising interest rates, while the seller hedges against the risk of falling interest rates.

Other parties who use interest rate agreements in the future are speculators who only want to make bets on future changes in the direction of interest rates. [2] Development exchange operations in the 1980s offered organizations an alternative to FRA for hedging and speculation. Forward interest rate agreements (FRA) are linked to short-term interest rate futures (STIR). Since STIR futures oppose the same index as a subset of FRAs, IMM FRAs, their pricing is linked. The nature of each product has a unique gamma profile (convexity), which leads to rational price adjustments, not arbitrage. This adjustment is called a term convexity adjustment (CFL) and is normally expressed in basis points. [1] [US$ 3×9 – 3.25/3.50% p.a] – means that the interest on deposits from 3 months is 3.25% for 6 months and the credit rate from 3 months is 3.50% for 6 months (see also the margin between money and letter). The seizure of an “FRA payer” means paying the fixed interest rate (3.50% per year) and obtaining a variable rate of 6 months, while the entry of a “receiver-FRA” means paying the same variable rate and obtaining a fixed rate (3.25% per year).

The cash difference of an FRA, which is traded between the two parties and calculated from the point of view of the sale of a FRA (imitating the maintenance of the fixed interest rate) is as follows:[1] In other words, a forward rate agreement (FRA) is a tailor-made financial futures contract on short-term deposits. An FRA transaction is a contract between two parties for the exchange of payments on a deposit, the so-called nominal amount, which must be determined on the basis of a short-term interest rate called the reference rate, over a period predetermined at a future date. Fra transactions are recorded as hedges against changes in interest rates. The buyer of the contract blocks the interest rate to guard against a rise in interest rates, while the seller protects against a possible fall in interest rates. At maturity, no money exchanges hands; on the contrary, the difference between the contractual interest rate and the market price is exchanged. The buyer of the contract is paid if the published reference rate is higher than the contractually agreed fixed rate, and the buyer pays the seller if the published reference rate is lower than the fixed and contractual rate. . . .