Distinguish Between A Forward Rate Agreement (Fra) And An Interest Rate Futures Contract

We learn different conceptions of interest rates and some of the contracts that are related to them. Interest is the rent paid for a loan. A loan is the securitized form of a loan. There are coupon bonds and zero coupon bonds. The latter are also called discount bonds. Interest rates and bond prices depend on their maturity. The maturity structure is the function that the maturity period gives to the corresponding interest rate or borrowing price. An important reference rate for many interest rate contracts is libOR (London Interbank Offered Rate). Loans can be borrowed over future time intervals at interest rates agreed today. These courses are called futures or futures courses depending on the type of agreement. In the case of an interest rate swap, counterparties exchange a flow of fixed-rate payments for a flow of variable-rate payments, usually indexed to LIBOR. Duration and convexity are the basic instruments for managing the interest rate risk inherent in a bond portfolio. We also check some of the most common market conventions that come with data on the interest rate market….

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