Interest rate agreement

Definition:

An over the counter agreement whereby one party, for an up-front premium, agrees to compensate the other at specific time periods if a designated interest rate (the reference rate) is different from a predetermined level (the strike rate.) Also called a FRA (pronounced like ‘draw’) or forward rate agreement.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Force Majeure

Events outside the control of the parties. These events are acts of man, nature, governments and regulators, or impersonal events. Contract performance is forgiven or extended by the period of force... Read More

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