forward-rate-agreement

The seller of in a forward rate agreement (FRA) is planning to lend in the future and hedges by "locking" in the FRA's fixed rate, so that if rates decrease, this seller receives a cash settlement. David's XLS is here: https://www.dropbox.com/s/75psfdv2sdne3s1/042518-fra-hedge.xlsx?st=dtrvv2xd&dl=0

A forward rate agreement (FRA) is a loan that starts in the future ("forward start loan") but where principal is not lent; instead, the notional is referenced to determine the interest paid. The FRA contract specifies a fixed rate of interest. The seller (buyer) is lending (borrowing) at the...