I have to model IRS in an IT system and I have a question related to this modeling.

Can an IRS have a different payment calendar by leg ?

Thanks and regards


1 Answer 1


For IR swaps based on USD LIBOR, it is standard to to have different payment frequencies (quarterly v semiannual) and daycounts and to have two separate kinds of calendars: payments and, for a floating leg, resets (London, for observing the resets, because you don't want to be looking for LIBOR on a Boxing day, but you do want LIBOR from July 4th). (For SOFR, the industry seems to be standardizing on annual v annual, and not caring about non-US holidays).

On a cross-currency swap, typically the legs use the same payment calendar that is a union of when the two currencies can be paid. E.g. New York and Target - if you can't receive USD today because of Thanksgiving, then don't pay EUR today, but wait a day.

I can easily imagine a float v float swap whose legs have different reset calendars because they use indices with different calendars (not 3mo v 6mo LIBOR, but e.g. LIBOR v SOFR or Fed funds).

From a user interface POV, it would be annoying to have to specify separate payment calendars when booking.

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    $\begingroup$ There may also be operational reasons, e.g. when you use the 'correct' fixing calendars, but for some funny reasons you want to pay using regional calendars due to local holidays. $\endgroup$ Jun 20, 2021 at 13:19
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    $\begingroup$ I can't find a term sheet right now, but I recall that USD LIBOR v ARS fixed has/had payment calendat (both legs) NY & Buenos Aires & London, following; reset/fixing calendar (USD float leg) London, previous. $\endgroup$ Jun 20, 2021 at 13:28
  • $\begingroup$ Thank you both for your answer and comments. So, in the case of a single currency IRS, in a user interface, if I understand well, the currency's calendar could be the default payment calendar of the trade, and we can also let the user, optionally, add other calendars if we want them to be also considered for payments (for example, if the user adds one calendar, an union of this calendar with the currency's calendar will be made to determine payment dates ). With such solution, all cases should be covered. $\endgroup$
    – Olivier
    Jun 20, 2021 at 14:14
  • $\begingroup$ The reasoning would be the same for CCy Swaps excepted that the default payment calendar would be the union of when the two currencies can be paid. $\endgroup$
    – Olivier
    Jun 20, 2021 at 14:17
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    $\begingroup$ For single-currency swap, you may want to add "London" or some other payment holiday by default. Otherwise, having good defaults and the ability to overrode them sounds perfect. Take a look at this USD-BRL example pls sec.gov/Archives/edgar/data/1508478/000119312511077213/… “Adjustment to Payment Date(s),” “Unscheduled Holiday,” "Local Business Days" - as you see, the business logc can get complicated, and IT systems seldom try to fully implement it. $\endgroup$ Jun 20, 2021 at 14:35

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