forward rate agreement
(FRA)
Noun


A forward interest rate contract in which two parties agree on the payment of interest on a notional principal amount for an agreed currency for an agreed period of time from a specified future date, where the seller pays the buyer for any increase above an agreed forward rate and the buyer pays the seller for any decrease below the reference rate prevailing on that date.

Synonym(s): 
  • future rate agreement.
Comment: 
FRA is not an acronym; each individual letter of the abbreviation is pronounced.