Transaction form
Forward interest rate agreements are traded in the OTC market, and the transaction amount and delivery date are not limited, which is flexible and simple. Intra-exchange trading of interest rate futures, standardized contract trading.
credit risk
Both sides of the forward interest rate agreement have credit risk, and interest rate futures are very small.
Cash flow before delivery
There is no cash flow in the forward interest rate agreement, and there is net cash flow in the daily margin account of interest rate futures.
Applicable currency
Forward interest rate agreement all convertible currencies, which are stipulated by the interest rate futures exchange.
Specifically:
Forward interest rate agreement is a hedging method to prevent the risk of interest rate changes in international financial markets. Forward interest rate agreement hedging originated in London financial market and was quickly accepted by major financial centers in the world. With the wide application of forward interest rate agreement, the "market" of forward interest rate agreement was formed in London from June 65438 to June 0984. The forward interest rate agreement is a "forward interest rate agreement" signed by the borrower and the borrower after the establishment of the loan relationship. The agreed interest rate at the time of signing is compared with the London Interbank Offered Rate (LI-BOR) on the interest date. If the agreed interest rate is lower than LIBOR, the lender will pay the difference to the borrower. If the agreed interest rate is higher than LIBOR interest rate, the borrower will pay the lender the excess. Using forward interest rate agreement to hedge the value can not only avoid the cumbersome application of forward foreign exchange by borrowers and borrowers, but also avoid the risk of interest rate changes. However, this kind of business itself is not a lending behavior, and it does not appear on the bank's balance sheet, so it is not regulated by the government.
Interest rate futures are medium-term, long-term and short-term deliverable financial vouchers of trading objects, and are financial futures based on securities. In fact, it is a short-term investment with a fixed term and a standard transaction amount in the trading market, and it is a forward contract for money market and capital market instruments. Like other futures, interest rate futures are also subject to legal constraints. Through open market bidding, buyers and sellers agree to deliver a certain amount of securities at an agreed interest rate on a specified date in the future. The market price of these securities is deeply influenced by the fluctuation of market interest rate. If the interest rate rises, its market price will fall. If the interest rate falls, its market price will rise. There are many factors that affect the interest rate level, but the main factors are: the government's fiscal policy, monetary policy, inflation, national production and income, and national demand for cars and houses, all of which will affect the interest rate trend. Interest rate fluctuation makes both borrowers and borrowers in financial markets face interest rate risk. In order to avoid or reduce interest rate risk, interest rate futures came into being. Interest rate futures are different from forward interest rates. The latter's contract transactions are limited to the banking system and do not involve exchanges, so there is no unified transaction supervision. Moreover, the transaction object is a currency with a specific amount and interest-bearing period. "