Broken Dates and Turn Points

Table of Contents

Summary

Two distinct irregularities complicate an otherwise clean tenor grid: a broken date is a bespoke maturity that does not correspond to a standard tenor label and must be interpolated between the surrounding pillars, while a turn point is a fixed-calendar-time discontinuity (most commonly year-end) that must be prevented from bleeding into the interpolation of adjacent tenors. Both matter to how a term structure's interpolation method is applied, but for opposite reasons — one is an ordinary date that needs interpolating normally, the other is a date that must be interpolated around.

Detail

Broken dates (odd dates)

A broken date (also odd date) is a maturity that does not correspond to a standard tenor label — for example, a 47-day or 63-day forward. Broken dates arise in bespoke trade structures and require interpolation between the surrounding standard tenor points, using whichever interpolation method the term structure specifies (see Interest Rate Curves for the concrete interpolation methods used for interest rate curves). A broken date is not itself irregular in any structural sense — it is simply a date that happens not to coincide with a quoted pillar.

Turn points

Turn points mark discontinuities in the short-end rate curve caused by calendar effects — most commonly year-end, where funding costs spike. They appear in pairs:

  • Turn start: the date the turn effect begins (e.g. 31 December).
  • Turn end: the date it ends (e.g. 2 January).

Unlike standard tenors, turn points are fixed in calendar time: they do not roll forward as the horizon date advances, in contrast to how every other tenor point on the same term structure is expressed relative to the horizon date. They require special handling in interpolation — a term structure's interpolation method must isolate the turn effect's spike so that it does not bleed into the value of adjacent, structurally ordinary tenor points. A turn point also differs from a broken date in kind, not just in calendar behaviour: it "nudges" the rates around it rather than defining a tradeable maturity in its own right — see the three-way classification below.

Three-way tenor classification

Every entry on a forward ladder is one of exactly three kinds, and the system must track which throughout the entry's lifetime (see Curve Point Provenance for the proposed fields this classification would be recorded in, and why it should never change once recorded):

  • Standard: a normal named tenor (O/N, 1M, 1Y, and so on).
  • Broken date: a non-standard, interpolated maturity added explicitly (e.g. 47 days), tracked distinctly from the standard tenors around it — this document's "broken dates (odd dates)" section above.
  • Turn: a fixed-calendar-date discontinuity, potentially spanning multiple days, which nudges rates around it rather than defining a tradeable maturity — this document's "turn points" section above.

Entry and display

Managing broken dates places several requirements on the forward ladder they are entered through, all specific to broken dates rather than to standard tenors.

The system must let a user add or remove a broken date directly on the ladder, rather than limiting entry to the pre-defined standard tenor set, and must accept a broken date entered either as an absolute date or as a tenor label where applicable — the same date-vs-tenor duality needed for other single-instrument date fields, such as an option's expiry.

In order to support broken-date and forward-forward analysis, the system must provide an isolated calculation surface, separate from the live term structure, on which a user can price an arbitrary forward-forward relationship (e.g. "the rate 3M in 6M") or an arbitrary bespoke maturity before deciding whether it is worth adding as a real broken date. This is necessary because such exploration is inherently speculative — a user comparing several hypothetical structures needs to try many of them without any one attempt mutating the term structure every other part of the system reads from. To satisfy this, the calculation surface must use the same tenor resolution and interpolation machinery the live term structure uses, so a result is a faithful preview of what adding the point for real would produce rather than an approximation; it must read the live term structure's current state to ground its calculations in real market levels, without ever writing a result back into its point set; and it must leave no provenance trace on the live term structure, so an explored-but-discarded hypothesis is exactly as if it had never been tried — consistent with provenance's "no promotion" rule applying only to points that were actually added, not to speculative ones that never were.

The system must also let a broken date carry its own market data feed, the same as any standard tenor entry on the ladder, since a broken date is not necessarily purely interpolated — it must be possible for one to be directly quoted rather than derived.

Because the Out Of Convention (Out of Today / Out of Tomorrow / Out of Spot) affects broken dates the same way it affects standard tenors, the system must visually distinguish any ladder entry — broken date or standard tenor alike — that is not on the conventional spot basis whenever a non-standard basis is selected.

On volatility surfaces specifically, the system must offer a separate toggle controlling whether interpolated tenors are displayed on the ladder at all, distinct from the broken-date handling described above.

See also

  • Term Structures and Tenors — the hub.
  • Tenor — the standard labels a broken date falls between.
  • Pillar — the quoted points a broken date falls between, as distinct from tenor labels in general.
  • Term Structure — where an interpolation method is specified.
  • Interpolation — the concrete methods (log-linear, zero-linear, cubic spline, monotone spline) this document assumes.
  • Curve Point Provenance — how the three-way classification is recorded and tracked over a point's lifetime.
  • Term Structure Extent — the curve-type-specific ranges a broken date's position falls within.
  • Out Of Convention — the quoting-basis convention that also governs visual flagging for broken dates.
  • Forward Ladder — the entry/display surface broken dates are managed through, distinct from the term structure it presents.

Further reading: terminology verification

"Broken date""odd date" and "the turn""turn effect" were checked against independent market sources to confirm they are real, standard industry terminology rather than local naming:

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