FRM: Forward rate agreement (FRA)

An FRA is a contract that lets the buyer (who is long the rate) lock-in an interest (borrowing) rate. In this example, the FRA buyer locks in LIBOR at 3%. For more financial risk videos, visit our website! www.bionicturtl...

[@philzuco]

WOW. This is the best explanation I've seen ANYWHERE on the mechanics of FRA's. David, you've got a serious gift for teaching! Keep it up!

[@jonlaughlin9417]

Can you please speak to my Uni lecturer and show him how to explain this concept... Thanks

[@maria_lara111]

LOL!

[@thuyPham-gz9dd]

I didn’t know this before... I had to downloaded and listened the full earnings call presentation of some hedge funds to understand lol

[@spaceghost1313]

great stuff. its not an overly difficult concept really but was confusing me quite a bit in my lecture notes. your explanation and presentation is very clear and easy to understand. thanks bionicturtle

[@melveyr]

for some reason you are always the video that ends up making the most sense! you are great david.

[@the11diesel]

Just wanted to say thanks for these videos. You are truly helping people!

[@shijiewang394]

OMG This is really a good demonstration! Better than my derivatives professor! Thank you so much.

[@HuongLyBong]

Thanks so much! I have been struggling to understand FRA all evening, and now I had understood.

[@bizdev123]

David, thanks for posting this. Would encourage people to stick with this video as it improves considerably towards the end. The beginning IMHO could be a bit clearer, but towards the end it rocks!
Would be good to explain what interest rate is used at settlement to calculate NPV . It would also be useful to have a practical use of why you would use a FRA in a real world scenario.
Good vid,would recommend.

[@Sophievan88]

great! I have never understood FRA until I saw this video. thanks

[@jonasgraz1]

Great explanation David. Much clearer than some of the CFA study material.
Jonas

[@michlam14]

thanks! was struggling to understand this on my own based on notes. you explained it perfectly.

[@ngopalakrishna]

Thank you .. I am paying lot of money as CFA coaching and those professors arent explaining half as good as you! Repect!

[@thassim]

Clear as crystal. Thank you!

[@MrAgatozaur]

thank you all the way from Poland. This was really helpful to understand.

[@aman113]

Thanks mate this helped me a lot and I used the same example you used to explain it to my friends who were struggling with this as I were.

[@karimaelouahmani7078]

THANK YOUUU, well explained

[@StarrieSun]

Thank you for this very clear explanation. Useful for my CFA studies.

[@gauravchopra]

Hi David, can you please clarify in this example are you saying that if we say i m buying an FRA i m PAYING fixed or RECEIVING fixed. As per wikipedia, Buyer FRA receives FIXED, Payer FRA pays fixed

[@mrbenl]

great explanation! always enjoy your videos. they are my most productive use of RUclips ;)

[@binalood1]

Like always, David, you explained it Very Well!

[@kexinfeng9503]

OMG you just saved my life!!!!!! Thank you so much David!!!

[@iulyiany]

Thank you! You made things clear. Keep up the good work!

[@avishek24]

This is a great explanation! Thanks for putting this up...

[@cristianrodriguezing]

Thanks! I finally understood, where the formula comes from :)

[@VarunKalia26]

Beautifully explained !!

[@bionicturtle]

Thank you for watching! We are happy to hear that our video was helpful! :)

[@idfthebestj]

Really liked your explanation. However I was wondering what is the difference between an FRA and a forward-forward?

[@bionicturtle]

@downvidu thank you i really appreciate your kind feedback

[@sf05ful]

Thank you so much David, I'm just so glad I found your video, books explanation is just horrible!! Now I can finish my thesis! woohoo :)

[@Rey_B]

many thanks. one question arises:
at 3rd month, the value of contract is npv of total spread for 6m down the line. but what about at initiation? how to find the value of contract for reporting purpose?
my assumption: I'd have to interpolate to get 6m rate on initiation using 3m and 9m rates then find present value of spread. is that ok??

[@Sourcelighteer]

Thank you. This really cleared up my question

[@francescocosma1506]

why in H27 you didn't do, to actualize, 5.000/((1+libor)^0.5)?

[@kaisun2222]

So good an explanation, thank you!

[@boy0748]

explannation is awsome

[@nehaswaroop9333]

This is the best! thanks for this video!

[@LuvLondon2010]

amazing, better than textbook!

[@axristop]

very good presentation

[@sahilkhan2470]

thanks i really needed this!

[@Ares766]

Thanks! Very helpful!

[@arunee2020]

Thank you so much.. it really help.

[@kwcykelvin]

thanks!

[@hasselhoffrules]

how did you discount to PV?

[@rajgsrinivas]

amazin video thanks bionic turtle

[@davetube75]

Where can you buy an FRA

[@sibeili1778]

Could any one explain why shot FRA is equivalent to borrowing short-term to finance long- term investment?

[@Samanthacorca]

Hola.. como hago para obtenerlo en español.. Gracias por tu ayuda!

[@FredSamuel-y4c]

41735 Orn Crossroad

[@GissingJill-i1q]

Lemuel Lodge

[@alikakelekele]

How come you are long the fixed rate and not short? I'm confused because the other party is short LIBOR...

[@sare5943]

thanks alot

[@bionicturtle]

You're welcome! Thank you for watching! :)

[@myselfforamtrivedi6499]

Thanks buddy. Excel made it quite simple I guess. Anyways Thanks

[@mahimapandey6505]

a