Day count conventions - Revision history

imported>Doug Williamson: Update for LIBOR transition.

2022-04-14T16:57:22Z

Update for LIBOR transition.

← Older revision		Revision as of 16:57, 14 April 2022
Line 57:		Line 57:

	====Money market basis (actual/360)====		====Money market basis (actual/360)====
	This basis is commonly used for ~~all~~ Eurocurrency ~~LIBOR~~ rates, except sterling. The day count fraction is defined as the actual number of days in the period over 360.		This basis is commonly used for Eurocurrency rates, except sterling.

			The day count fraction is defined as the actual number of days in the period over 360.

	====Actual/365 fixed====		====Actual/365 fixed====
	This basis is commonly used for ~~all~~ sterling interest rates~~, including LIBOR~~.		This basis is commonly used for sterling interest rates.

	The day count fraction is defined as the actual number of days in the period over 365.		The day count fraction is defined as the actual number of days in the period over 365.
Line 151:		Line 153:
	* [[Effective annual rate]]		* [[Effective annual rate]]
	* [[Leap year]]		* [[Leap year]]
	* [[LIBOR]]
	* [[Money market yield]]		* [[Money market yield]]
	* [[Nominal annual rate]]		* [[Nominal annual rate]]

imported>Doug Williamson: Layout.

2022-03-07T19:46:20Z

Layout.

← Older revision		Revision as of 19:46, 7 March 2022
Line 1:		Line 1:
	The day count convention determines how interest accrues over time in a variety of transactions, including bonds, swaps, bills and loans. ~~Interest~~ is usually expressed to accrue at a rate per annum (the reference period). It is often due and payable at shorter intervals, usually a number of months (the interest period).		The day count convention determines how interest accrues over time in a variety of transactions, including bonds, swaps, bills and loans.

			In wholesale markets, interest is usually expressed to accrue at a rate per annum (the reference period).

			It is often due and payable at shorter intervals, usually a number of months (the interest period).


	The day count (or 'daycount') convention regulates how the parties are to calculate the amount of interest payable at the end of each interest or other period.		The day count (or 'daycount') convention regulates how the parties are to calculate the amount of interest payable at the end of each interest or other period.

	It is commonly expressed as a fraction. The [[numerator]] will be the convention for the number of days in the period - usually actual or a notional 30. The [[denominator]] is the convention for the number of days in the reference period - often 360 or 365.
			It is commonly expressed as a fraction.

			The [[numerator]] will be the convention for the number of days in the period - usually actual or a notional 30.

			The [[denominator]] is the convention for the number of days in the reference period - often 360 or 365.


	Conventions vary depending on the market type, location and the currency in question.		Conventions vary depending on the market type, location and the currency in question.
Line 147:		Line 157:
	* [[Periodic yield]]		* [[Periodic yield]]
	* [[Simple interest]]		* [[Simple interest]]
			* [[Wholesale]]

imported>Doug Williamson: Link with Student article.

2017-04-16T11:11:20Z

Link with Student article.

← Older revision		Revision as of 11:11, 16 April 2017
Line 147:		Line 147:
	* [[Periodic yield]]		* [[Periodic yield]]
	* [[Simple interest]]		* [[Simple interest]]


			== Student article ==
			[[Media:2016_02_Feb_-_Many_happy_returns.pdf\| Happy returns - different conventions, different interest amounts]]

	[[Category:Long_term_funding]]		[[Category:Long_term_funding]]
	[[Category:Cash_management]]		[[Category:Cash_management]]

imported>Doug Williamson: Mend broken mathtype equation.

2016-12-14T12:52:27Z

Mend broken mathtype equation.

← Older revision		Revision as of 12:52, 14 December 2016
Line 119:		Line 119:
	Compounding can be taken to an extreme in which the interest is continuously compounded. Continuously compounded rates are rarely quoted in practice for outright deposits or borrowings, although they are used extensively in valuing options.		Compounding can be taken to an extreme in which the interest is continuously compounded. Continuously compounded rates are rarely quoted in practice for outright deposits or borrowings, although they are used extensively in valuing options.

	~~<math>~~Discount factor (DF) = e^{-Rt}</~~math~~>		Discount factor (DF) = e<sup>-Rt</sup>

	where:		where:

imported>Doug Williamson: Mend broken mathtype equation.

2016-12-14T12:40:00Z

Mend broken mathtype equation.

← Older revision		Revision as of 12:40, 14 December 2016
Line 113:		Line 113:
	where:		where:

	:'''r''' = periodic interest rate (~~<math>~~r = R ~~\times \frac{~~days}{year~~}</math>~~)		:'''r''' = periodic interest rate (r = R x days / year)
	:'''n''' = total number of compounding periods		:'''n''' = total number of compounding periods

imported>Doug Williamson: Mend broken mathtype equation.

2016-12-14T12:38:40Z

Mend broken mathtype equation.

← Older revision		Revision as of 12:38, 14 December 2016
Line 109:		Line 109:
	Offers the opportunity for interest payments to be reinvested in order to earn interest on interest. Compound interest is typically used for instruments greater than one year.		Offers the opportunity for interest payments to be reinvested in order to earn interest on interest. Compound interest is typically used for instruments greater than one year.

	~~<math>~~Discount factor (DF) = ~~\frac{~~1}{(1+r)^{n}}</~~math~~>		Discount factor (DF) = 1 / (1 + r)<sup>n</sup>

	where:		where:

imported>Doug Williamson: Mend broken formulae.

2016-12-13T16:37:23Z

Mend broken formulae.

← Older revision		Revision as of 16:37, 13 December 2016
Line 93:		Line 93:
	====Simple interest====		====Simple interest====
	Simple interest does not offer the opportunity to earn interest on interest, ie, there is no compounding of		Simple interest does not offer the opportunity to earn interest on interest, ie, there is no compounding of
	interest~~. Simple interest is typically used for instruments with a maturity of less than one year~~.		interest.

	~~<math>Discount factor (DF) = \frac{1}{( 1+ R \times \frac{days}{~~year~~})}</math>~~		Simple interest is typically used for instruments with a maturity of less than one year.

	~~where~~:
			Discount factor (DF) = 1 / ( 1 + (R x days / year) )

			Where:

	:'''R''' = simple interest rate on an actual/365 or actual/360 fixed basis		:'''R''' = simple interest rate on an actual/365 or actual/360 fixed basis

imported>Doug Williamson: Layout.

2016-11-21T23:10:51Z

Layout.

← Older revision		Revision as of 23:10, 21 November 2016
Line 1:		Line 1:
	The day count convention determines how interest accrues over time in a variety of transactions, including bonds, swaps, bills and loans. Interest is usually expressed to accrue at a rate per annum (the reference period). It is often due and payable at shorter intervals, usually a number of months (the interest period).		The day count convention determines how interest accrues over time in a variety of transactions, including bonds, swaps, bills and loans. Interest is usually expressed to accrue at a rate per annum (the reference period). It is often due and payable at shorter intervals, usually a number of months (the interest period).


	The day count (or 'daycount') convention regulates how the parties are to calculate the amount of interest payable at the end of each interest or other period.		The day count (or 'daycount') convention regulates how the parties are to calculate the amount of interest payable at the end of each interest or other period.

Line 10:		Line 11:

	The London interbank market, on the other hand, operates on the basis of actual/360, except where the currency is sterling, for which the London interbank convention is actual/365 fixed.		The London interbank market, on the other hand, operates on the basis of actual/360, except where the currency is sterling, for which the London interbank convention is actual/365 fixed.


	Commonly used day count conventions are considered below, but first it is important to bear in mind the various business day conventions that may apply. These regulate the start and end date of each period.		Commonly used day count conventions are considered below, but first it is important to bear in mind the various business day conventions that may apply. These regulate the start and end date of each period.

imported>Doug Williamson: Removed link

2016-11-16T14:20:54Z

Removed link

← Older revision		Revision as of 14:20, 16 November 2016
Line 131:		Line 131:
	==See also==		==See also==
	* [[Bond equivalent yield]]		* [[Bond equivalent yield]]
	* [[CertFMM]]
	* [[Compound interest]]		* [[Compound interest]]
	* [[Conventional year]]		* [[Conventional year]]

imported>Doug Williamson: Rationalise links.

2016-11-16T11:51:24Z

Rationalise links.

← Older revision		Revision as of 11:51, 16 November 2016
Line 130:		Line 130:

	==See also==		==See also==
	* [[Day count]]
	* [[ACT]]
	* [[Bond equivalent yield]]		* [[Bond equivalent yield]]
	* [[CertFMM]]		* [[CertFMM]]
	* [[Compound interest]]		* [[Compound interest]]
	* [[Conventional year]]		* [[Conventional year]]
			* [[Day count]]
	* [[Effective annual rate]]		* [[Effective annual rate]]
	* [[Leap year]]		* [[Leap year]]