An interest rate swap (or virtually any types of swaps) usually has a spot start date which means two business days after the transaction is made. In swap markets the most popular floating rate index is LIBOR. A LIBOR rate is usually set two business days (+2) before the rate is actually set in effect. This convention also applies to the LIBOR setting on swaps. Generally, most swaps will start two days after the fixed rate is set. This convention allows for the floating side to be set in the LIBOR market. If the transaction is made very late in the day, the parties may agree to start the swap three days forward as it is too late to set the LIBOR rate. Sometimes, this won’t be cited until after the swap has been entered into, especially after lengthy negotiations. This type of swap start, borrowed from the FX market, is known as a spot start.
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