Day-count conventions
About this course
ACT/365, ACT/360, 30/360, ACT/ACT, business-day adjustments. Same trade priced four ways — see the £ difference. Spot convention mismatches on confirmations in 30 seconds.
What you'll learn
- Why conventions matter
- The four conventions
- Business-day adjustment
- Self-test
Part of these pathways
Related courses
- Interest rates: foundations
- Recent global economic events
- Inflation: RPI, CPI & index-linked gilts
- Money markets primer
- Yield curves explained
- MPC, QE & gilt supply
Common questions
What is 30/360?
Each month treated as 30 days; year as 360. Common for some bond markets (US corporate). Eliminates month-length distortions but is a fiction.
What is ACT/360?
Actual days elapsed divided by 360. Standard for US dollar money market, EUR money market (€STR), and most international interbank deposits.
What is ACT/365?
Actual days elapsed divided by 365 (or 365.25 in some conventions). Standard for UK sterling money market and SONIA-linked instruments.
What is ACT/ACT?
Actual days elapsed divided by actual days in the year (365 or 366). Used for UK gilts and many sovereign bonds. Most accurate for long-dated instruments.
What is Business-day adjustment?
Rule for handling cash-flow dates that fall on non-business days. Most common: 'Modified Following' — move to next business day, unless that crosses a month-end, then move backward.
What is Forward rate agreement?
OTC contract fixing today the rate that will apply on a future short-term deposit. Day-count convention determines how the cash settlement is calculated.