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Suppose a swap is booked with maturity on June 19, 2016 (which is a Sunday). Accruals are adjusted according to the modified following roll convention and follow U.S. holidays. For the last cashflow of the swap (regardless of its length), I can think of two reasonable ways to handle the end of the accrual period:

  1. Accrual ends on June 19, 2016 and the accrual end date is not adjusted because adjusting would cause accruals to continue past the swap's maturity date.
  2. The accrual end date is adjusted to June 20, 2016 according to its specified roll convention without regard for the maturity date of the swap.

Which of these is typically the correct choice? I looked over the 2006 ISDA definitions a bit, but I didn't find anything that specifically spoke to this case.

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The standard convention is to use the next good day as the "payment day." I'd say generally speaking, the following two settings should produce identical cashflows:

  • Maturity date of 6/20/2016 & roll day of 19.
  • Maturity date of 6/19/2016 & roll day of 19 or unspecified.
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  • $\begingroup$ Then you'd expect the roll day to adjust to 6/20, right? $\endgroup$ – BunsOfWrath Jul 6 '16 at 17:02
  • $\begingroup$ @BunsOfWrath Yes $\endgroup$ – Helin Jul 6 '16 at 17:19
  • $\begingroup$ It sure seems weird to have accruals going out past maturity, but I think that explanation makes sense. $\endgroup$ – BunsOfWrath Jul 6 '16 at 17:27
  • $\begingroup$ @BunsOfWrath happens all the time. Also remember swaps are customized. You can customize the dates to be completely irregular if you desire. $\endgroup$ – Helin Jul 6 '16 at 17:28

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