Modified Following - ISDA Definition

2021 ISDA Interest Rate Derivatives Definitions A Jolly Contrarian owner’s manual™ Modified Following in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. Modified Following in all its glory “Modified Following Business Day Convention” or “Modified Following”, when used in conjunction with a date, means that, if that date would otherwise fall on a day that is not a Business Day, subject to Section 2.3.6 (Consequences of an Unscheduled Holiday), it will instead fall on the first following day that is a Business Day unless this would be in the next calendar month, in which case the date will fall on the first preceding day that is a Business Day. edit Resources and Navigation Template:M res DI 2021 Index: Click ᐅ to expand: 2021 ISDA Definitions - Premium Premium version of this page

Overview

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Compare with Section 4.12(a) of the 2006 ISDA definitions which provided:

If “Modified Following” or “Modified” is specified, that date will be the first following day that is a Business Day unless that day falls in the next calendar month, in which case that date will be the first preceding day that is a Business Day;

Is it different? Not wildly.

Summary

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A popular means of calculating interest periods and determining interest payment dates. Nearly as popular as the following business day convention. If the end of your interest period would end on a non-business day, you roll forward to the next following one, unless that would fall in the following month, in which case you roll back to the immediately preceding business day. Popular with the tax- and accounting-obsessed, who care about what period you book a profit or revenue stream in.

See also

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