An IMM swap is a swap where the end dates of the underlying swaps follow the cycle of IMM (International Monetary Market) futures and options. That is, the underlying swaps terminate on the IMM dates.
The IMM dates are the four dates of each year which these swaps use as their scheduled termination date. The dates are the third Wednesday of each quarter, i.e., the third Wednesday of March, June, September and December.
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This instrument is supported for all currencies in the system, with the exception of MXN. |
You can enter into a fixed-float IMM swap or a float-float IMM swap.
For each leg in the IMM swap that is based on a floating rate, by default the interest of that floating rate is not compounded. However, you can then manually define that you want to compound the interest for each floating rate in the instrument1.
In an IMM swap, generally the payment frequency and the fixing frequency of the second leg need to be the same. However, if this leg is based on a floating rate and you enable the Compounding feature for it, you can then set the fixing (or compounding) frequency to be greater than the leg’s payment frequency. You can then also choose to have only one payment for this leg, at maturity.
Why enter into an IMM swap?
These swaps let the swap user remove the reset basis risk between cash LIBOR and LIBOR futures.
Pricing an IMM Swap in SDX Interest Rates
When pricing an IMM swap in SDX Interest Rates:
You cannot set the payment frequency of either leg to be greater than quarterly, i.e., the frequency of the IMM dates.
You activate the Compounding feature using the Compounding dropdown list which is displayed for each floating leg in the instrument. For more information see Compounding .
You can select a settlement currency that is different from the trade currency.
For more information see Changing the Settlement Currency.