At expiration, a forward or futures contract calls for either delivery of the item or a cash payment of the same value. Future products expire on day T. The settlement date for delivery for most exchanges is specified as T plus x, where x is the number of days aft er the x expiration of the
future contract. For example, security future products of the Options Clearing Corporation expire on the third Friday of every month and have the settlement date for delivery of T plus three.
In the case of swaps, the term settlement date is used to specify the date on which a payment occurs while the period between settlement dates is called the settlement period. Take a plain vanilla interest rate swap with swap payments for one on the 15th day of every quarter beginning in March. The settlement dates for this contract is March 15, June 15, September 15, and December 15.
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