Choosing Day-Count Conventions for Fixed-Income Accruals
Summary
This discussion surveys day-count conventions used to calculate interest accruals across bonds, money markets, floating-rate notes, and other instruments. It lists examples such as 30/360, Actual/360, Actual/365, Actual/Actual, and Brazil’s Business/252, alongside reported regional and product conventions. Answers add that Actual/365 and 30/360 each have variants, and that floating-rate notes commonly use Actual/360, with some currencies using Actual/365 Fixed. They also identify Actual/Actual ICMA as a convention used for many sovereign bonds.
The practical guidance is to select conventions required by the project and rely on an established finance library where appropriate, since variant rules complicate implementation. Convention choice depends on instrument and market, and the list in the question is incomplete: several entries remain unresolved, and some regional examples may need verification. Day-count rules can have special cases, so software should implement the precise convention specified for the instrument rather than infer it from a broad label.
Key ideas
- Day-count conventions determine how elapsed time is converted into interest accruals.
- Convention choice varies with the instrument, currency, and market.
- Labels such as Actual/365 and 30/360 include variants with different calculation rules.
- Established quantitative finance libraries can reduce the effort and risk of implementing conventions.
- A convention list or market rule of thumb may be incomplete, so instrument-specific terms need checking.
Tags
Full text
# Which day count conventions are there and where do they apply? # Which day count conventions are there and where do they apply? I am looking for - a list of day count conventions. Is the list on Wikipedia complete or do you know others? - Which rules of thumb are there to choose day count conventions when none is specified, depending for example on product, country or underlying? - Are there special cases which can provoke software bugs? Edit: results and rules-of-thumb DCC so far: - 1/1 - ? - 30/360 US - US for corporate, US municipal, and some US Agency bonds - 30E/360 - money market Switzerland - 30E+/360 - ? - 30E/360 ISDA - ? - 30/360 - for corporate bonds, agency and municipal bonds, mortgage backed securities, Eurobonds, US corporate bonds - ACT/360 - for US T-bills, US commercial paper; US and Euro & Switzerland money markets, mortgages - ACT/364 - Kenya, Zimbabwe - ACT/365 - US Treasury bonds, US treasury notes, UK gilts; German bunds, South Africa (all markets) - ACT/365L - ? - ACT/365 Fixed - ? - ACT/ACT - New Euro bonds, LIFFE UK bond futures, LIFFE German bund futures - ACT/ACT ISDA - ? - ACT/ACT ISMA - ? - ACT/ACT ICMA - ? - ACT/ACT AFB - ? - NL/365 - ? - BUS/252 - Brazil Refs: Wikipedia: day_count_convention Foreign Exchange Derivatives, by Kotze, 2011 Interest Rate Instruments and Market Conventions Guide, by OpenGamma, 2013 Implementing BUS/252 Daycount Convention, by Kennedy 2012 ESI: Day Count Conventions, by Eclipse Software Inc. Day Count Conventions and Accrual Factors, by Fincad Corp. ## Answer by Phil H (score 3, accepted) https://quant.stackexchange.com/a/10083 There are lots, decide which ones you actually need for your project - follow the coding maxim You Ain't Gonna Need It. Be aware that those rules have variants: Actual/365 has 2 varieties, fixed and actual, 30/360 has at least 3 varieties (see that Wikipedia article). Then there is Brazillian Bus/252, etc etc. Consider using a library (like Fincad or Quantlib) which has this stuff set up already and save your time and effort for more interesting things. ## Answer by Rodolfo Oviedo (score 1) https://quant.stackexchange.com/a/78371 Interest of floating-rate notes mostly use the Actual/360 convention. Notable exceptions are floating-rate notes denominated in the British pound and currencies of some former British colonies like Australia (CAD), New Zealand (NZD), Canada (CAD), Hong Kong (HKD), and South Africa (ZAR), whose interests are calculated on an actual/365 Fixed basis. Treasury bonds from most (in dollar-basis terms) countries use the Actual/Actual (ICMA) convention. ISMA is a previous name of ICMA.
Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.