IMM Swaps, Forward Starts, and Futures Hedging Conventions

Summary

An IMM dated swap is generally a standard interest rate swap whose start date falls on an IMM date, so it can be viewed as a forward starting swap when that date is later than the spot start date. The document distinguishes this from an IMM anniversary swap, whose subsequent schedule also follows IMM dates. That schedule can align more closely with interest rate futures hedges than calendar anniversary dates, though date mismatches can otherwise remain.

It also separates swaps from deliverable swap futures: the futures contract has its own pricing complexity, while the delivered instrument is a standard swap starting on an appropriate IMM date. IMM dates occur monthly on the third Wednesday, but trading is usually concentrated in March, June, September, and December; serial futures for other months are described as much less liquid. The explanations are brief and do not give pricing equations or detailed conventions.

Key ideas

• An IMM dated swap is usually a standard swap that begins on an IMM date, making it a forward start when the date is in the future.
• An IMM anniversary swap also schedules later dates on IMM dates and may fit futures hedges more closely.
• Deliverable swap futures are futures contracts with distinct pricing considerations, even though delivery involves a standard IMM-start swap.
• IMM dates occur monthly, while trading activity is usually concentrated in the quarterly cycle and other serial futures are less liquid.

Tags

# IMM Swaps vs. Forward Swaps


# IMM Swaps vs. Forward Swaps












Could we think of IMM dated swaps as forward swaps (since they trade only on specified dates and they might not be the current date)? For example, today is June 2nd, the next IMM swap is June 14 (not the spot date).

## Answer by Phil H (score 2, accepted)

https://quant.stackexchange.com/a/11546

Broadly, yes. An IMM dated swap is usually just a standard swap starting on an IMM date. However, there are a few closely related instruments which you could be asking about:

- IMM-anniversary swap - this not only starts on an IMM date, but also keeps to IMM dates for the roll schedule. It is a better match when hedging with IR futures, because an IMM-start swap would prefer Calendar anniversaries to IMM ones, and small date mismatches will occur.

- Deliverable swap futures - in this case, the instrument is a future, not a swap, so it has all the complexity of pricing a future. The delivered swap, however, is a standard swap starting on the appropriate IMM date.

Note, by the way, that there are IMM dates in every month (third Wednesday), but usually it is the Mar/Jun/Sep/Dec cycle that is traded. If you need to hedge a May IMM swap, there are serial futures albeit they have nowhere near the liquidity of the major months.

## Answer by Helin (score 2)

https://quant.stackexchange.com/a/11543

Yes, that's exactly right. IMM swap are swaps that resets on IMM dates. Otherwise, the math is exactly the same as a standard swap.

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.