Adjusting Swap Accrual Ends When Maturity Falls on a Weekend

Summary

The document considers how a swap’s final accrual period should be handled when its stated maturity falls on a Sunday and its schedule uses a modified following convention with U.S. holidays. It contrasts keeping the accrual end on the contractual maturity date with moving that date to the next business day, and asks which treatment is typical under market definitions.

The response says the next good business day is generally used as the payment date. It also suggests that a maturity set to the following business day with the original roll day may produce the same cashflows as leaving maturity on the weekend with that roll day specified or omitted. The note is brief and does not quote the governing definitions or detail how accrual dates, payment dates, and business-day adjustments should be represented in a particular confirmation or system, so implementation should be checked against the contract terms.

Key ideas

• A weekend maturity can raise separate questions about the accrual end date and the payment date.
• The response describes moving payment to the next good business day as the general convention.
• It suggests two maturity and roll-day settings may produce equivalent cashflows.
• The note does not establish a universal rule for every contract or system.

Tags

# Roll convention applied to weekend swap maturity date


# Roll convention applied to weekend swap maturity date












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:

- 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.

- 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.

## Answer by Helin (score 0, accepted)

https://quant.stackexchange.com/a/27684

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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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.