Forward rate agreement discount factor
16 Jan 2017 A forward rate agreement (FRA) is a cash-settled OTC contract between needs to be discounted, using the settlement rate as a discount rate. A primer on forward rate agreements, a type of interest-rate derivative used to hedge interest rate risk FRA Payment, = Settlement Amount, x, Discount Factor. Since the settlement is happening today, the payment will be equal to the present value of these savings. The discount rate will be the current LIBOR rate. FRA