Buying a forward rate agreement is analogous to buying a put and selling a call, where the forward price is equal to the exercise price of the options.

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A forward rate agreement (FRA) is a financial contract between two parties to exchange interest payments for a predetermined amount of money at a specified rate (the forward rate) on a future date. It does not involve the combination of buying a put and selling a call option. Instead, it is more directly related to agreeing on a future interest rate, without the optionality that comes with the combination of options.

Buying a Forward Rate Agreement Is Analogous to Buying a Put