An interest rate for a future period implied by today's spot rates. It is the rate that makes investing for a long period equal to rolling shorter ones.
Where you will meet it
Forward rate comes up in 11 learning outcome notes across the FRM syllabus.
A few of them:
Foreign Exchange Markets FRM Part I · Financial markets and products
“With simple interest over the period, the forward rate is F = S × (1 + iD) ÷ (1 + iF).”
Interest Rates FRM Part I · Valuation and risk models
“A forward rate is the rate, fixed today, for borrowing or lending over a future period.”
Covered Interest Parity Lost: Understanding the Cross-Currency Basis FRM Part II · Liquidity and treasury risk measurement and management
“In an FX swap the parties exchange two currencies at the spot rate and agree to reverse the exchange at a forward rate on a set date, usually within a year.”
VaR Mapping FRM Part II · Market risk measurement and management
“A forward rate agreement 6x12 that pays fixed and receives floating is long a 6-month zero and short a 12-month zero of equal present value.”
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