What is interest rate future contract?

An interest rate future is a futures contract with an underlying instrument that pays interest. The interest rate future allows the buyer and seller to lock in the price of the interest-bearing asset for a future date.Click to see full answer. Similarly, you may ask, what is an interest rate contract?Definition of Interest Rate Contract. Interest Rate Contract means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate insurance arrangement, or any other agreement or arrangement designed to provide protection against fluctuation in interest rates.One may also ask, how do interest rates affect futures? Effect of Interest Income The futures price decreases when there is a known interest income because the long side buying the futures does not own the asset and, thus, loses the interest benefit. Otherwise, the buyer would get interest if he or she owned the asset. In this regard, what is interest rate forward contract? A Forward Rate Agreement, or FRA, is an agreement between two parties who want to protect themselves against future movements in interest rates. By entering into an FRA, the parties lock in an interest rate for a stated period of time starting on a future settlement date, based on a specified notional principal amount.What is an interest rate future how can they be used to reduce interest rate risk by a borrower?Interest rate futures are used to hedge against the risk that interest rates will move in an adverse direction, causing a cost to the company. For example, borrowers face the risk of interest rates rising.

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