Forward Rate Agreement
Forward Rate Agreement — OTC contract on a future fixing of a reference rate.
Definition
Forward Rate Agreement refers to oTC contract on a future fixing of a reference rate. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Policy-sensitive rates set the discount factor for almost every other asset class. When oTC contract on a future fixing of a reference rate shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what forward rate agreement is saying. If oTC contract on a future fixing of a reference rate moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Read spot, forwards, and real vs nominal together — one leg alone invents a story. Prefer a short written null hypothesis for Forward Rate Agreement: what would falsify the current reading in the next window?