Day Count Convention

Day Count Convention

Day Count Convention refers to the standardised conventions market participants use to confirm the formal timelines for how interest accrues in debt and debt derivatives contracts. Day-count conventions differ between markets and products. The most common are 30/360 (all months are 30 days; all years are 360 days); 30/365 (same except years are 365 days); Actual/360 (actual no. of days per month in a 360-day year), Actual/365 (same except years are 365 days), and Actual/actual (actual days per month and actual days per year). The amount of interest paid under each convention will differ slightly.

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