The rate difference results from the comparison between the fra interest rate and the settlement rate. It is calculated as follows: Forward Rate Agreements (FRA) are linked to short-term interest rate futures (STIR). Since STIR futures oppose the same index as a subset of FRAs, IMM FRAs, their pricing is linked. The nature of each product has a distinctive gamma profile (convexity), which leads to rational price adjustments, not arbitrage….