Dear Neeti,
This is the Forward Rate Contract ( Agreement made for future requirement) loan period. Usually the period is quoted in the format of A x B. A represents the number of months until the loan is set to begin. And B representing tthe number of months until the loan ends. To find the length of loan period substract A from B.
In the finst case loan period is 3 months. (6-3). In the second case loan period is 6 months ( 9-3).
| Originally posted by : Neeti | ||
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Plz tell me the meaning of following: 3×6FRA. Or 3×9 FRA |
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FRA refers to Forward Rate Agreement in short. It is an over the counter (OTC) agreement between two parties.
Meaning of 3X6 FRA:
This refers to interest rate starting 3 months from now and ending at 6 months from now. Total underlying tenure is for (6-3) 3 months.
For example : On 1st JAN 3X6 FRA would refer to interest rate for period starting on 1st April and ending on 30th June.
FRA is a OTC derivative product and is used to hedge interest rate exposure (converting variable interest rate to fixed). It is a kind of Interest Rate Swap.
Bharat Aggarwal
CAclubindia
