# forward rate agreement (FRA)

- Canonical URL: https://www.gerhardmerk.de/forward-rate-agreement-fra
- Post ID: 605181
- Modified: 2026-09-07T19:47:59+00:00
- Language: en

## Definition

A forward rate agreement (FRA) is an interest-rate derivative used to determine the cost of borrowing or the return on lending for a future period. The parties agree in advance on a rate, a notional amount and the period to which the arrangement applies. Once that period begins, the agreed rate is compared with a reference market rate. Usually, only the resulting interest difference is paid in cash; the notional principal is not transferred. FRAs are used to manage exposure to changes in short-term interest rates.

## Machine-readable

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