Applying Actual/Actual Day Counts to NOK NOWA Overnight Rates
Summary
The document examines how to determine the annual day-count denominator for the Norwegian overnight index NOWA. Its quoted definition bases the nominal annual rate on the actual number of days in the year ahead from the fixing date, using 365 or 366 days, and prorates the rate by the days to maturity. The questioner works through dates around February and leap years to clarify how that rule applies.
The accepted answer confirms the interpretation and identifies the approach broadly as Actual/Actual, while listing related recognized labels such as Act/Act ICMA and ISMA-99. It distinguishes this from fixed-denominator conventions such as Actual/360 or Actual/365. The response does not establish a more precise sub-convention for NOWA or compare alternatives; users applying it in valuation or accrual calculations may need to consult the index’s governing documentation for convention details.
Key ideas
- NOWA annualizes using the actual number of days in the year following the fixing date.
- The denominator can be 365 or 366, depending on the fixing date and leap-year interval.
- The answer classifies the approach broadly as Actual/Actual.
- Related day-count labels include Act/Act ICMA and ISMA-99.
- The document does not identify a more specific NOWA sub-convention.
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Full text
# NOK NOWA overnight day count # NOK NOWA overnight day count The NOK overnight index NOWA is defined as: > Reported interest rates shall be calculated as nominal annual rates for the actual number of days in the year ahead (365 or 366). (The percentage return over the term is calculated by dividing the interest rate by the actual number of days in the year ahead and multiplying it by the actual number of days to maturity). As far as I can tell, this is a relatively non-standard day count (because it refers to the year from the fixing date). My interpretation of the rule gives: - Fixing on 2015-02-28 = 365 days (2015-02-28 to 2016-02-27 inclusive) - Fixing on 2015-03-01 = 366 days (2015-03-01 to 2016-02-29 inclusive) - Fixing on 2016-02-28 = 366 days (2016-02-28 to 2017-02-27 inclusive) - Fixing on 2016-02-29 = 365 days (2016-02-29 to 2017-02-28 inclusive) Two questions: - Is my interpretation correct? - Does this day count have a recognised name? ## Answer by user18663 (score 0, accepted) https://quant.stackexchange.com/a/27667 Yes the interpretation is correct as you are using the day count convention Actual/Actual and yes this day count convention is a non -standard as there are no fixed number of days we have to take like in case of Actual/360 or Actual/365. The reason for using Actual/Actual here as we are calculating on an accrued basis like we do for the calculation of accrued interest. As far as I know there is no standard terminology for the various day count conventions but the below are the recognized names worldwide:- Actual/Actual, Act/Act ICMA, ISMA-99, Act/Act ISMA
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