Talk:Day count convention

Etymology

The article is sorely lacking a history and etymology of these conventions. The mechanics and arithmetic of calculating them are thorough, but the history, rationale, and stories behind each is completely missing. -- Thoreaulylazy (talk) 08:49, 21 June 2010 (UTC)

Question

I believe that there are errors in the 30/360 daycount description. I would suggest the following instead:

The number of days from M1/D1/Y1 to M2/D2/Y2 is computed according to the following procedure:

1. If D1 is 31, change D1 to 30.

2. If D2 is 31 and D1 is 30 or 31, then change D2 to 30.

3. If M1 is 2, and D1 is 28 (in a non-leap year) or 29, then change D1 to 30.

Then the number of days, N is:

N = 360(Y2 - Y1) + 30(M2 - M1) + (D2 - D1)

I have not seen the increase rule ever (for case where date2 is 31 and date1 is less than 30), and the February rule is confusingly placed as a variation. However, the current version has had so much effort put into it, maybe it is more common.

Yes you're right as I've just been reading the ISDA 2006 document. TheMathemagician (talk) 11:24, 1 November 2012 (UTC)

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(related to edits of definiton of Act/Act ISDA)

Hi, i am new to the wiki and I am sorry you think I shouldn't edit your page. Valid point. This is why I would like discuss with you and let you decide. Okay, contary to what you mentioned in "Development" at the moment ISDA does have a well defined language for 8 DCF in its "ISDA 2006 Defintion" with "Act/Act ISDA" being one of them. However "Act/365" or "Actual/365" are no longer a market defined term if you follow ISDA. Therefore I think it's more suitable not to related the 2 togehter with "Act/Act ISDA", because it will mislead readers to believe a non-ISDA defined DCF is in fact the same as an ISDA 2006 Definition defined DCF, especially when you mentioned your source is ISDA 2006 Definition

For this reason, may I kindly ask you to review this part of your otherwise wonderful webpage, for the benefit of all readers of your page, remove those 2 DCF from the "Act/Act ISDA" section?

Thanks for your time

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CouponFactor

The article needs an explanation of what CouponFactor is used for. When introduced it says it is used 'when determining the amount of interest paid by the issuer on coupon payment dates', but that seems inconsistent with the formula given later in that section for 'the Interest is calculated as', which uses DayCountFactor not CouponFactor. If 'interest paid by the issuer on coupon payment dates' is supposed to mean something different from 'Interest', that difference needs to be made clear.

As presented, the CouponFactor item appears to be redundant.

Day Adjust Rule

This article should like to an article on Day Adjust rules that tell you what to do on non-trading days.

I believe no article exists at the moment... but if someone knows about Modified following etc then it would be a good addition.

You probably mean Date rolling, for which there is a page, but a wikilink would in dead be relevant. --Jarl Friis 07:43, 10 January 2007 (UTC)

The calculation of the coupon payment and the accrued interest can take a payment date rolling into account (Adjusted convention) or ignore it (Non-Ajusted convention). This is not mentioned.

Adjusted dates (aka bumped dates) are usually taken into account with actual/fixed_base conventions. I suppose the same applies with non-ICMA actual/actual conventions, but I do not know. Unajusted dates (aka unbumped dates) are used with actual/actual (ICMA) and 30/360 conventions thus preserving a coupon factor equal to 1/frequency.

It would be nice to clarify these issues because there the information in the web may be reduded to https://quant.stackexchange.com/questions/76150/does-the-rolling-of-bond-payments-from-non-business-days-to-the-next-or-previous and https://quant.stackexchange.com/questions/30417/what-happens-to-accrued-interest-and-coupon-payment-if-coupon-date-is-weekend?noredirect=1&lq=1 Rodolfoaoviedoh (talk) 23:04, 8 August 2023 (UTC)

Combining Pages

I saw the note about combining Day count convention and Interest rate basis. I think that's a very good idea. I think there's probably a lot of additional work needed as well. I'm more than happy to get the process started.

Are there others who have thought about this effort?

--Rudd73 21:29, 19 May 2007 (UTC)

Good idea. Go for it. MrRK 22:00, 30 May 2007 (UTC)

This is a heads-up that I'm starting the merge process. I'll do a straight merge first, and then look at extending the discussion. Looking ahead, we will probably want to do some level of merge/synchronization with the following topics:

• Accrued interest
• Date rolling

--Rudd73 17:36, 11 June 2007 (UTC)

I've merged Interest rate basis into this page. I also performed some clean-up:

• Cited normative sources for the conventions, with the exception of 30E+/360. We still need one for that.
• Standardized the presentation, so that all conventions use the same format and match the way they are most commonly expressed by the defining agencies.
• Expanded the References and Further reading generally.
• Because of the consolidation of the past ten years, I did not include conventions which were used in the past but for which I could find no current usage. I'd suggest adding conventions only if a current usage with reference can be found.
• For the same reason, I pared back the information on how certain conventions are being used. This is in a state of flux. Also, some of them were incorrect.

I think we should merge Accrued interest into this page as well.

Date rolling needs some clean-up and references. I'm on the fence as to whether into should be merged in this page.

I'm looking forward to some feedback.

--Rudd73 22:19, 1 August 2007 (UTC)

The first rule for 30/360 US

An edit was made to change the month for D1 in the first rule from February to January. February indeed looks very odd. It means that the prior coupon payment date is a year before the settlement date of the trade. I've certainly never seen such a situation. I'm used to bonds paying two or four times a year. And I'm not used to seeing bonds using this convention paying interest at the end of the month.

But February is indeed the correct month. The normative reference (Mayle 1993) is unfortunately only available in a costly hard copy, but you can find the correct method in Accrued Interest & Yield Calculations and Determination of Holiday Calendars, p. 8 (though the format is slightly different; I used the original SIFMA rules in the page).

This is an interesting situation for a number of reasons. As mentioned in the References, the first two rules were added after the original rules (excluding the first two now given) had been used for years, for tens of thousands of securities. But the situation was encountered, so Jan Mayle added the new rules to cover it.

The second reason is how to interepret a reference giving the method without these first two rules (e.g., the ISDA). Are they establishing a different method or have they simply not bothered updating their documentation to cover a very rare situation? I lean towards the latter, barring any definitive resolution.

--Rudd73 01:35, 11 August 2007 (UTC)

Usage

Would be useful if this page noted which DCCs were used in which jurisdictions. 155.192.161.113 (talk) 12:17, 16 March 2010 (UTC)

Basic Use

There's no basic examples on how these are used, or the needs to differentiate between them.

EG: if the rate is 12% per annum simple, and you're trying to calculate the interest earned for the month of Feb, then do you use:

12 * (28/365) or 12 * (30/360) or some other calculation?

This to me is the clear driver for the need for day count conventions, yet a simple example is not provided.

As I'm by no means an expert on this topic, I'm reluctant to put in an example of my own

Taras.di (talk) 05:56, 23 December 2010 (UTC)

It works the other way around; the contractual terms of the security or loan agreement specify the convention being used up front.

There are so many conventions because there is no one best way to solve the problem. See Day Count Conventions for a discussion of the trade-offs among the more common conventions. It also has an example in the context of renting an apartment.

Rudd73 (talk) 21:48, 19 January 2011 (UTC)

Links

Link to Accrued Interest Calculator returns HTTP 404. I have tried to find excel document on their site without success. Vladimir.Lavrnic (talk) 02:39, 11 April 2013 (UTC)

Actual/Actual AFB example over mutliple years appears to not follow rules?

The rules outlined are:

• Factor = Days(Date1,Date2)/DiY
• If 29th february is in date range from Date1 (inclusive) to Date2 (exclusive), DiY=366 else DiY=365
• If date range from Date1 to Date2 spans multiple years, calculation is split in two parts:
• § Number of complete years counted back from the last day in the period
• § The remaining initial stub, calculated using the basic rule
• § ISDA additional rule: If counting backwards for multiple years, if the last day of the relevant period is 28 February the full year should be counted back to 28 February unless 29 February exists in which case 29 February should be used.

Take the example where Date1 = 2004-02-28 and Date2 = 2008-02-28. Applying the rules gives:

• 4 full years
• Date2' = 2004-02-29 [rebased Date2 by counting back + ISDA additional rule]
• DiY = 365, because: Date1 = 2004-02-28, Date2' = 2004-02-29; 29 February is not in date range from Date1 (inclusive) and Date2' (exclusive) i.e. the remaining initial stub
• Factor = 4 + 1/365

However the example in the article shows the result without explanation, and shows the Coupon Factor to be 4 + 1/366. This would be true if the rules for multiple years in fact still use the original Date2 to determine if 29 February is in the date range, not the rebased Date2'. The rules for multiple years however claim that the initial stub is to be used in the basic rule. Maybe the example shows the exact result but then I would say that the explanation is somewhat ambiguous.

Could someone clarify? Thanks! Attlanttizz (talk) 09:31, 26 November 2014 (UTC)

Article title

Convert Days to Years in Finance would probably be the more appropriate name for this article — Preceding unsigned comment added by Jaroslav.Skrivanek (talk • contribs) 11:21, 2 December 2017 (UTC)

Effect of date rolling on coupon payments and accrued interest calculations

The calculation of the coupon payment and the accrued interest can take payment date rolling into account (Adjusted convention) or ignore it (Non-Ajusted convention). This is not mentioned in the section on date rolling.

Adjusted dates (aka bumped dates) are usually taken into account with actual/fixed_base conventions. I suppose the same applies with non-ICMA actual/actual conventions, but I do not know. Unajusted dates (aka unbumped dates) are used with actual/actual (ICMA) and 30/360 conventions thus preserving a coupon factor equal to 1/frequency.

It would be nice to clarify these issues because there the information in the web may be reduded to https://quant.stackexchange.com/questions/76150/does-the-rolling-of-bond-payments-from-non-business-days-to-the-next-or-previous and https://quant.stackexchange.com/questions/30417/what-happens-to-accrued-interest-and-coupon-payment-if-coupon-date-is-weekend?noredirect=1&lq=1 Rodolfoaoviedoh (talk) 23:11, 8 August 2023 (UTC)