Mastering Financial Calculations: A step-by-step guide to the mathematics of financial market instruments, Second edition

Chapter 3. Forward-Forwards and Forward Rate Agreements (FRAs)

“An important point is to consider which comes first. Are forward-forward rates (and hence futures prices and FRA rates) the mathematical result of the yield curve? Or are the market’s expectations of future rates the starting point?”

<feature><title></title>

Forward-forwards, FRAs and futures

Applications of FRAs

Exercises

</feature>

Forward-Forwards, FRAs and Futures

Overview

Forward-forwards, forward rate agreements (FRAs) and futures are very similar and closely linked instruments, all relating to an interest rate applied to some period which starts in the future. We shall first define them here and then examine each more closely. Futures in particular will be considered in the next ...