A forward rate agreement (FRA)is an interest rate risk-management product,generally provided by banks over the-counter.Which of the following statements regarding forward rate agreements is correct?
A) FRAs are not standardised with regard to contract period and amount.
B) The centralised clearing house (CCH) holds the deposits and margin calls.
C) As a bank is the counterparty to the FRA, there is no credit risk.
D) All of the given answers.

Question

Quizplus · Accepted Answer

FRAs are not standardised with regard to contract period and amount, as they are typically customised to meet the specific needs of the parties involved. The other statements are incorrect. The centralised clearing house does not hold deposits and margin calls in relation to FRAs and there is counterparty credit risk involved when dealing with banks.

A Forward Rate Agreement (FRA)is an Interest Rate Risk-Management Product,generally