FRA
You'll learn how forward rate agreements work and how to use them to lock in interest rates for future borrowing or investment decisions.
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In this lesson
- 0:00 Forward rate agreements explained
- 0:39 Understanding FRA structure and notation
- 1:58 Basis points and rate spreads
- 2:42 How FRAs protect against rate changes
About this lesson
This video covers the key components of an FRA quote—the principal amount, the time period, and the bid-ask spread—and explains how the settlement mechanism ensures you always pay or receive the agreed rate, regardless of where market rates move. Understanding FRAs is essential for managing interest rate risk in Financial Management and will help you answer exam questions on hedging strategies with confidence.
Duration: 4m
Transcript
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