The Forward rate: A model for interest rate and risk within the market, fundamental theory.

Forward rates are a deal between two big financial institutions in the OTC market, we sought to define this concept according to interest rate and risk in the Stock Market, however the change of such a concept is very sensitive and crucial to understand; we are going to define a model that incorporates the change of a Forward rate with respect to interest rate and volatility, the frame time T is fixed and everytime time is running out even the OTC markets have some pledge into risk and arbitrage all within the Forward Market, the counterparts are indeed the bloc which defines the amount of FT but to be more honest they have some allegation for the market mechanisms which logically are the milestone that determines the real value of the Forward rate. Our model has the privilege of supposing that risk in the Stock Market which is by the way fractional affects Forward prices in a random way which means that Forward prices are not forecastable using all the information about risk in the Stock Market, after calibrating our model using Cac 40 indice as a pretext we find consistent results, the path of our model shows more variations and appears volatile however it traces the same variation as the Market Futures of Cac 40. JEL Classification . B23