An FRA is similar to any type of forward contract,but the payoff is based on an interest rate,rather than the price of an asset.

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An FRA (Forward Rate Agreement) is a type of contract in which the buyer and seller agree to exchange a set interest rate at a later date. The payoff is based on the difference between the agreed-upon rate and the prevailing market rate at the time of settlement. It is similar to a forward contract in that it is a customized agreement between two parties, but the payoff is based on an interest rate rather than the price of an asset.

An FRA Is Similar to Any Type of Forward Contract,but