Intermediate capital for the difference on an FRA traded between the two parties, calculated from the perspective of the sale of an FRA (imitating the receipt of the fixed interest rate) is calculated as follows:[1] FRAP(FRA) ×NP×PY) × (11-R× (PY)), where: FRAP-FRA paymentFRA-rate Forward rate, or fixed rate, or loan amount applicable to periods of p , or number of days during the duration of the contractY-number of days per year on the basis of the correct daily counting agreement for the contract, „begin“ and “ („frac“) („text“ „FRA“) times periods NP P-X-Y, legal time,frac (), „frac“ 1 , 1 , 1 , “ , “ , “ “ , “ – text `FRAP` ` `text `payment FRA` „or amount of loan on which “ („) and („) Y (R-FRA) ×NP×P) × (1 R× (YP)) :FRAP-FRA paymentFRA-Forward rate rate, or fixed interest rate that is paid, or variable interest rate used in the nominal capital contract, or amount of the loan that interest is applied over the period of time, or number of days during the term of the contractY-number of days per year based on the correct daily account For the contract Many banks and large companies will use FRAs to guarantee future interest. The buyer opposes the risk of rising interest rates, while the seller protects himself against the risk of lower interest rates. Other parties that use interest rate agreements are speculators who only want to bet on future changes in interest rates. [2] Development swaps of the 1980s offered organizations an alternative to FRAs for protection and speculation. Forward Rate Agreements (FRA) are over-the-counter contracts between parties that determine the interest rate payable at an agreed date in the future. An FRA is an agreement to exchange an interest rate bond on a fictitious amount. For example, if the Federal Reserve Bank is raising U.S. interest rates, known as the „monetary policy tightening cycle,“ companies will likely want to set their borrowing costs before interest rates rise too quickly.