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Infoline: 800 900 900

Interest risks

FRA - forward rate agreement

  • FRA is a balance-neutral transaction consisting in an agreement on the interest rate in the future period.
  • Unlike the forward-forward type deposit, the principal is not changed, but only the difference between the FRA contract price agreed on and the market price at the contract due date is equalized (reference rate PRIBOR).
  • FRA purchaser is secured against any interest rate increase and the seller against its fall.
  • Usual periods are similar as for forward-forward transactions. 

IRS - Interest rate swap

  • The transaction allows securing the risk of interest rate fluctuation for a period longer then one year.
  • This is an agreement on the exchange of interest payments in a single currency (exchange of fixed interest rate for variable interest rate).
  • Variable interest rate is usually based on the reference interest rate (PRIBOR) for 6 months.
  • Fixed rate is set individually according to the contract amount and period.
  • In case of IRS, the principle does not change, but analogous to FRA, respective interest is settled to the prearranged principal amount.
  • Analogous to FRA, the IRS purchaser is secured against any interest rate increase, while the seller against its fall. Regardless of the current market interest rates, the effective interest rates will be constant. 

Interest options

Conditional interest tools are offered by the Treasury Department exclusively to financial professionals to resolve their individual needs in the area of the interest risk management.

These products fall within the group of so-called conditional (option) tools. One of the transaction participants has namely always the option to realize the transaction. The holder of the option tool pays a premium for this right.



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