Brazil has a pending new holiday that is expected to be official in the next month, for date Nov 20.
Existing BRL interest rate swaps contracts have a clause that fixed accruals are not impacted by new holidays, but float accruals are impacted. How do I adjust my BRL swap accrual calculations once the holiday is official? I thought I could just adjust the initial (PV) notional and day count, but that would impact both legs.


1 Answer 1


New non-business days, one-off or annual, appear on various calendars pretty often even in developed markets. Recent examples come to mind: the Queen's funeral in London, the new King's coronation in London, the day of mourning for President George W Bush in 2018 in the U.S., and probably the same for Jimmy Carter any day now.

Fixed income markets have ways of dealing with new non-business days. If a previously scheduled payment or settlement falls on such a day, then it gets rescheduled like any other, according to the term sheet / documentation. If the interest amount is daycounted, then it too as adjusted for a new number of actual days.

But Brazil is special in that the interest of some instruments accrues only on business days. My understanding is that they don't want the interest amounts to change when the calendar changes. For that, you'd need to have two calendars - the one frozen as of the instrument's inception, to calculate the number of days of interest accrual as planned at inception; and also the current calendar still, to schedule coupon payments and settlements on current business days, like in all markets.


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