Sir can you please tell me how to know in FRA question whether we have to recieve from FRA PROVIDER or we have to pay them
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FRA
4y ago#1That depends on whether the FRA is when borrowing money or depositing money and whether the actual interest rate is higher or lower than that fixed by the FRA.
This is explained in my free lectures in interest rate risk management.
Sir I watched your lecture I am clear about that is FRA is 10 % and actual rate is 8 % we will have to pay or if the actual rate was 12 % we will recieve
But I not clear for the deposit purpose .. if the actual deposits rate is greater than FRA than we will pay …am I right ?
I am just getting confused with this
4y ago#3Your example is correct for somebody who is borrowing money.
If they were depositing money then the payments and receipts would be the other way round :-)
If the FRA is 10% then if they are borrowing the end result is they will pay 10% in total. If they are depositing then the end result is that they will receive 10% in total.
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