Value Of A Forward Rate Agreement

This makes it easy to understand its mechanism, implications, and billing calculations. So, let`s calculate FRAt: the amount thus borrowed can be invested for 3m to 7% and this investment at maturity can be invested at an unknown interest rate in advance for 9m „r”. The composite value of these two cash flows (1 + 0.07 X 91/365) * (1 + r X 271/365) A future rate agreement is different from a commitment rate agreement. An exchange date is a binding contract in the foreign exchange market that sets the exchange rate for buying or selling a currency on a future date. A currency attacker is a hedging instrument that does not include an advance….