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Swap Effective Dates and Fixing Dates in Forward Swap Rates

Article Quant Q&A · Author: JakcieJnr
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Summary

The discussion distinguishes a swap's fixing date from its effective date when selecting the forward swap rate associated with a future payment. The example describes a swap that fixes at time T, becomes effective two days later, and pays after a further six months. The accepted response selects the forward rate for the swap period beginning on the effective date, rather than a period beginning on the fixing date itself.

The explanation notes that rate conventions differ by market. It gives EUR as an example in which a swap effective two days after T can have its fixing determined at T, and contrasts this with historical GBP LIBOR conventions, where the fixing was at the effective date. The answer is brief and convention-specific; it does not address current benchmark conventions, calendars, payment adjustments, or the construction of the curve. Practitioners need to confirm the relevant market's fixing lag and effective-date rules before applying the rate selection.

Key ideas

  • Forward swap rates are generally identified by the swap's effective and maturity dates.
  • In the example, the relevant forward period begins on the effective date, two days after the fixing date.
  • Fixing lags vary across markets, so the same date relationship should not be assumed universally.
  • The response contrasts EUR conventions with historical GBP LIBOR practice and omits current market details.

Tags

Fixed incomeDerivatives pricingStatistics
Full text
# How to read off a fixing from a swap curve?


# How to read off a fixing from a swap curve?












Let $F_t(T_1, T_2)$ be the forward swap rate at time $t$ from $T_1$ to $T_2$.

Consider a swap that fixes at time $T$, with effective date at time $T + 2D$, and payment date 6 months later at $T + 2D + 6M$.

That is, the swap fixes two days prior to being effective.

My question is, which of the following determines the fixing for the swap payment that occurs at $T + 2D + 6M$?

$$A:= F_T(T, T + F)$$ or $$B:= F_T(T + 2D, T + 2D + F)$$

## Answer by Attack68 (score 3, accepted)

https://quant.stackexchange.com/a/77846

The answer is B.

Generally speaking the notation refers to swaps or rates defined by their effective date.

In EUR a swap that is effective T+2 and finishes T+2+f is will have its fixing determined at time T.

In GBP a swap that is effective T+2 and finished T+2+F will have its fixing determined at time T+2 (since there was no LIBOR lag in GBP when it existed).

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.