If at the settlement date the settlement rate equals the contract rate, neither the FRA buyer not the seller benefits.

Question

Quizplus · Accepted Answer

If the settlement rate equals the contract rate, it means that the predicted interest rate has not changed and there is no difference between the estimated and actual interest rate. Therefore, there is no gain or loss for either party, and they both receive the same amount agreed upon in the FRA contract.

If at the Settlement Date the Settlement Rate Equals the Contract