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