Forward Rate Agreement - FRAs Notation

FRAs Notation

FRA Descriptive Notation and Interpretation

Notation Effective Date from now Termination Date from now Underlying Rate
1 x 4 1 month 4 months 4-1 = 3 months LIBOR
1 x 7 1 month 7 months 7-1 = 6 months LIBOR
3 x 6 3 months 6 months 6-3 = 3 months LIBOR
3 x 9 3 months 9 months 9-3 = 6 months LIBOR
6 x 12 6 months 12 months 12-6 = 6 months LIBOR
12 x 18 12 months 18 months 18-12 = 6 months LIBOR

How to interpret a quote for FRA?

- means deposit interest starting 3 months from now for 6 month is 3.25% and borrowing interest rate starting 3 months from now for 6 month is 3.50% (see also bid–offer spread). Entering an "payer FRA" means paying the fixed rate (3.50% p.a.) and receiving a floating 6-month rate, while entering a "receiver FRA" means paying the same floating rate and receiving a fixed rate (3.25% p.a.).

Read more about this topic:  Forward Rate Agreement