Forward Rate Agreements Forward Contracts Future Contracts

An FRA is a contract between two A futures contract is a

A forward contract is a
parties where one party agrees to standardized agreement to buy or
customized agreement between
pay a fixed interest rate, and the sell an asset at a predetermined
two parties to buy or sell an
Concept other party agrees to pay a floating price (the futures price) on a
asset at a predetermined price
interest rate (determined at a future specified future date. Futures
(the forward price) on a future
date) on an agreed-upon principal contracts are traded on organized
date.
amount for a specified future period. exchanges.

Formula

Parties There are two parties involved: the There are two parties involved: There are two parties involved:
Involved borrower and the lender. the buyer and the seller. the buyer and the seller.

Typically traded over-the-counter Traded over-the-counter /

Traded on organized/regulated
Traded/Nature (OTC) between financial Private agreement between
exchange.
institutions and large corporations. parties.