In finance, a Forward Rate Agreement (FRA) is a contract under which an agreed interest rate R_k applies to an agreed principal P for an agreed period of time, say between T_s and T_e. Normally the pay-off is computed without waiting out the interest period, by computing the future value of the FRA at T_e, and using the actual interest rate R at T_s to discount the future value as follows:

The times T_s and T_e must be computed using an agreed interest rate basis.