Derivatives · glossary
Modified following is a rule for a payment date that falls on a weekend or holiday. The date moves to the next business day. But if that day is in the next calendar month, it moves back to the last business day before. This keeps each payment inside its month, so interest periods do not drift.
The rule for a payment date on a weekend or holiday: move to the next business day, unless that is in the next month, and then move back. The draft Confirmation said plain "Following", and the junior had it corrected. Rate Definitions: Modified Following · Chapter 6 · Chapter 7
Explained in Chapter 6, Trade Date: the Confirmations, Line by Line, of Derivatives.
The swap pays on the loan's own quarterly dates. That way the loan interest and the swap payment settle on the same day. Some of those dates fall on a weekend or a holiday, and then the payment moves under the Modified Following rule.Read Chapter 7, Payments, Netting and the Calendar →
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A rule for moving a payment date off a non-business day. A payment due on Saturday 31 January 2026 moves back to Friday 30 January, because the next business day, Monday 2 February, is in the next month.
Following always moves to the next business day, even into the next month. Modified following does the same unless that crosses into a new month, and then it moves back instead.
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