The risk that arises because of the duration of the floating leg of a swap. This occurs because once the floating rate, such as LIBOR, is set, it becomes a 3-month (or 6-month) fixed rate. The stub risk is usually managed on a standalone basis as it can be significant when the floating rate is volatile.

In the context of futures contracts, it arises when the settlement dates of the exposure to be hedged using futures don’t correspond to futures maturities. This risk can be hedged using a combination of various instruments. However, in this case it is easier and more common to use swaps in lieu of futures.