Overview

A Forward Rate Agreement (FRA) is the simplest form of an Interest Rate Swap (IRS), essentially a single period IRS. The major difference is that FRAs do not accrue interest income. Since FRAs are single period instruments, the payoff is known well before maturity. The price of an FRA remains constant after the Dated Date of the floating leg, so there is no need for the legs to accrue. This document covers the details of Accounting, Data Management, and Performance for FRAs.

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Eagle has modeled FRAs as three rows in Data Management, each with its own Security Alias (10), linked by a common Primary Asset ID (14). Eagle Accounting must be set up to allow duplicate IDs by following the steps here: Allow Duplicate Cross Reference Identifiers Processing Notes.

FRAs should be set up and viewed using Issue Viewer or Security Reference Manager > Add > Derivatives > Interest Rate Swap, or Reference Data Center.

• The contract as well as the pay and receive legs will have their own Security Aliases
• All three records share the same Primary Asset ID
• Payment Frequency: set to At Maturity (MAT)
• Stopping accruals on FRA legs: to keep the legs of an FRA from accruing, use Add Debt Default Period/Inhibit Earnings
  • Both legs of an FRA can be marked to not accrue, with appropriate Comments added
  • This will stop the legs from accruing even past Dated Date/Settlement Date
  • Default Start Date must be set to Issue Date of the FRA

Trade Processing

Open (

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event type: OPENSWAP)

Once the security reference and entity data is setup trades can be entered using the Book Trade module under the Trade tab. Other than basic information like Trade Date and Settlement Date, below are FRA specific required fields:

• Data Entry Method: Enter Price to supply a clean unit price or Enter Total Settlement Amount to supply a value representing all-inclusive trade proceeds (both can be positive or negative)
• Notional Principal Value: represents the notional of the FRA.
• Traded Interest Local = Calculate None

Close (

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event type: CLOSESWAP)

The Book Trade module should be used to process closes. Eagle Accounting can handle both full and partial terminations.

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