The mechanism by which an interest rate swap with floating rates based on LIBOR typically resets at fixed intervals (such as three months or six months). An interest rate swap with a 3-month LIBOR leg will have this leg reset every three months to reflect changes in interest rate markets. Usually, the swap reset date precedes the payment date by the number of months in a reset period (three months, six months, etc). Occasionally, it happens that swaps trade on interim dates that do not correspond to calendar dates (swap reset dates and payment dates) that are set by market convention. A swap that resets every three months could have its first payment period defined in 70 days rather than 90 days. Because the first payment period is not a standard period, it is referred to as a stub period.
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