Applying the NONE Business Day Convention to Relative Dates
Summary
The document considers how to determine a Bermudan swaption exercise notification date defined as a number of business days before an already adjusted settlement date. The example uses an FpML relative-date specification with a negative business-day offset, the NONE business-day convention, and several holiday centers.
The accepted answer interprets NONE as applying no further date adjustment when the calculated date falls on a holiday or weekend. Under that reading, calculate the specified business-day offset from the adjusted settlement date, then retain the resulting calendar date even if it is not itself a business day. The answer is tentative and gives no contractual or FpML authority beyond its interpretation, so users applying this rule should confirm the convention against the governing documentation and trade terms.
Key ideas
- The example defines an exercise notification date relative to an adjusted settlement date.
- The NONE convention is interpreted as leaving a resulting non-business day unadjusted.
- The answer is explicitly tentative and does not cite authoritative FpML guidance.
- Confirm date calculations against the trade documentation and applicable convention definitions.
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Full text
# ISDA: Interpreting a date specified as x business days prior to another date with a business day convention of 'NONE'
# ISDA: Interpreting a date specified as x business days prior to another date with a business day convention of 'NONE'
I've got an interest rate swap, it has a right-to-break with a bermudan exercise schedule.
For each exercise, the settlement date is specified as an already-adjusted business day. The "last notification date" (i.e. expiry) for each exercise is specified as 5 business days prior to the settlement date, using the business day convention 'NONE' and the holiday cities given.
What is the correct way to determine the adjusted notification date in this case? Note that this contract is specified in FpML, if that makes any difference.
The FpML looks as follows:
```
<bermudaExerciseDates>
<relativeDates>
<periodMultiplier>-5</periodMultiplier>
<period>D</period>
<dayType>Business</dayType>
<businessDayConvention>NONE</businessDayConvention>
<businessCenters>
<businessCenter>GBLO</businessCenter>
<businessCenter>USNY</businessCenter>
<businessCenter>AUSY</businessCenter>
</businessCenters>
<dateRelativeTo href="cashSettlementPaymentDate" />
</relativeDates>
</bermudaExerciseDates>
```
## Answer by Jonas K (score 1, accepted)
https://quant.stackexchange.com/a/9803
Business day convention NONE means no adjustment when a day is not a business day, so I would assume the adjusted notification date to be five days prior to the adjusted settlement date regardless of holidays or weekends. Not sure how that would work out in practice though.Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.