difference between FRAs and Interest rate Swaps?

M

mylinh

New member
Joined
Jun 18, 2026
Messages
0
Reaction score
0
It seems to me that they are the same? Can someone explain the difference?
 
With an FRA, you agree to pay a fixed rate, that’s it. With a swap, you pay fixed and receive float, for example. There are two sides to it, not just locking in a rate like with FRA.
 
thanks, i am getting dumber and dumber after studying 6 hours a day and working 9 hours a day, this is so exhausting!!!
 
Actually, they are identical - except for the fact that FRA has 1 settlement period whereas Swaps have multiple settlement periods.
Dreary’s point is not valid as the economic rationale is same - with swaps you net the payments - with FRA - it is settled in cash (diff between the fixed vs. current floating).
 
CMLSML, true, but if you want to get a loan in 3 months and want to lock in a rate today, would you go for an FRA or for a swap? Even though from a profit/loss point of view they may be same, in reality, you will buy an FRA, not a swap. Another major diference is that FRAs are fixed in advance, paid in advance, while swaps are fixed in advance, paid in arrears.
 
You must log in or register to reply here.
Back
Top