Day count convention

In nance, a day count convention determines how

payment dates. The periods may be regular or irreginterest accrues over time for a variety of investments,
ular.
including bonds, notes, loans, mortgages, medium-term
notes, swaps, and forward rate agreements (FRAs). This CouponRate The interest rate on the security or loantype agreement, e.g., 5.25%. In the formulas this
determines the number of days between two coupon paywould be expressed as 0.0525.
ments; thus, calculating the amount transferred on payment dates and also the accrued interest for dates between
payments.[1] The day count is also used to quantify peri- Date1 (Y1.M1.D1) Starting date for the accrual. It is
usually the coupon payment date preceding Date2.
ods of time when discounting a cash-ow to its present
value. When a security such as a bond is sold between in- Date2 (Y2.M2.D2) Date through which interest is being
terest payment dates, the seller is eligible to some fraction
accrued. You could word this as the to date, with
of the coupon amount.
Date1 as the from date. For a bond trade, it is the
settlement date of the trade.
The day count convention is used in many other formulas
in nancial mathematics as well.
Date3 (Y3.M3.D3) The coupon payment date following
Date2. This would be the maturity date if there are
no more interim payments to be made.

Development

Days(StartDate, EndDate) Function returning the

number of days between StartDate and EndDate
The need for day count conventions is a direct conseon a Julian basis (i.e., all days are counted). For
quence of interest-earning investments. Dierent coninstance, Days(15 October 2007, 15 November
ventions were developed to address often conicting re2007) returns 31.
quirements, including ease of calculation, constancy of
time period (day, month, or year) and the needs of the
accounting department. This development occurred long EOM Indicates that the investment always pays interest
on the last day of the month. If the investment is
before the advent of computers.
not EOM, it will always pay on the same day of the
There is no central authority dening day count conmonth (e.g., the 10th).
ventions, so there is no standard terminology, however the International Swaps and Derivatives Association Factor Figure representing the amount of the Coupon(ISDA) and the International Capital Market AssociaRate to apply in calculating Interest. It is often extion (ICMA) have done work gathering and documentpressed as days in the accrual period / days in the
ing conventions. Certain terms, such as 30/360, Acyear. If Date2 is a coupon payment date, Factor is
tual/Actual, and money market basis must be underzero.
stood in the context of the particular market.
Freq The coupon payment frequency. 1 = annual, 2 =
The conventions have evolved, and this is particularly true
semi-annual, 4 = quarterly, 12 = monthly, etc.
since the mid-1990s. Part of it has simply been providing
[2]
[3]
for additional cases or clarication.
Principal Par value of the investment. (Also known as
face value, nominal value or just par)
There has also been a move towards convergence in the
marketplace, which has resulted in the number of conventions in use being reduced. Much of this has been driven For all conventions, the Interest is calculated as:
by the introduction of the euro.[4][5]

Interest = Principal CouponRate Factor

Denitions

Interest Amount of interest accrued on an investment.

3 30/360 methods

CouponFactor The Factor to be used when determining

the amount of interest paid by the issuer on coupon All conventions of this class calculate the Factor as:
1

3 30/360 METHODS

If the investment is EOM and (Date1 is the last day

of February), then change D1 to 30.
360 (Y2 Y1 ) + 30 (M2 M1 ) + (D2 D1 )
Factor =
360
If D2 is 31 and D1 is 30 or 31, then change D2 to
30.
They calculate the CouponFactor as:
If D1 is 31, then change D1 to 30.
360 (Y3 Y1 ) + 30 (M3 M1 ) + (D3 D1 )
This convention is used for US corporate bonds and many
360
US agency issues. It is most commonly referred to as
This is the same as the Factor calculation, with Date2 re30/360, but the term 30/360 may also refer to any
placed by Date3. In the case that it is a regular coupon
of the other conventions of this class, depending on the
period, this is equivalent to:
context.
CouponFactor =

Other names:
1
CouponFactor =
Freq
The conventions are distinguished by the manner in which
they adjust Date1 and/or Date2 for the end of the month.
Each convention has a set of rules directing the adjustments.

30U/360 - 30U/360 is not strictly the same as

30/360, it is used for the Euribor (Euro denominated Libor) curve and Euro denominated swaps,
with the distinction that under 30/360, each day in
a 31-day month accrues 30/31 of interest, whereas
in 30U/360 payment occurs on the 30th and the
31st is considered to be part of the next month. Bloomberg

Treating a month as 30 days and a year as 360 days was

devised for its ease of calculation by hand compared with
manually calculating the actual days between two dates.
Also, because 360 is highly factorable, payment frequen 30/360
cies of semi-annual and quarterly and monthly will be
180, 90, and 30 days of a 360-day year, meaning the paySources:
ment amount will not change between payment periods.

3.1

30/360 Bond Basis

This convention is exactly as 30U/360 below, except for

the rst two rules. Note that the order of calculations is
important:
D1 = MIN (D1, 30).

ISDA 2006 Section 4.16(f), though the rst two

rules are not included.[6]
(Mayle 1993)

3.3 30E/360
Date adjustment rules:

If D1 = 30 Then D2 = MIN (D2,30)

Other names:

If D1 is 31, then change D1 to 30.

If D2 is 31, then change D2 to 30.

30A/360.
Other names:
Sources:
ISDA 2006 Section 4.16(f).[6]

3.2

30/360 US

30/360 ICMA
30S/360
Eurobond basis (ISDA 2006)

Special German
Date adjustment rules (more than one may take eect;
apply them in order, and if a date is changed in one rule
the changed value is used in the following rules):
Sources:
If the investment is EOM and (Date1 is the last day
of February) and (Date2 is the last day of February),
then change D2 to 30.

ICMA Rule 251.1(ii), 251.2.[7]

ISDA 2006 Section 4.16(g).[6]

4.2

Actual/Actual ISDA

3.4

30E/360 ISDA

It also ensures that all days in a coupon period are valued

equally. However, the coupon periods themselves may be
Date adjustment rules:
of dierent lengths; in the case of semi-annual payment
on a 365-day year, one period can be 182 days and the
If D1 is the last day of the month, then change D1 other 183 days. In that case, all the days in one period
will be valued 1/182nd of the payment amount and all
to 30.
the days in the other period will be valued 1/183rd of the
If D2 is the last day of the month (unless Date2 is payment amount.
the maturity date and M2 is February), then change
This is the convention used for US Treasury bonds and
D2 to 30.
notes, among other securities.
Other names:

Other names:

30E/360 ISDA

Actual/Actual

Eurobond basis (ISDA 2000)

Act/Act ICMA

German

ISMA-99
Act/Act ISMA

Sources:

Sources:
ISDA 2006 Section 4.16(h).[6]
ICMA Rule 251.1(iii).[7]

Actual methods

ISDA 2006 Section 4.16(c).[6]

(Mayle 1993)

The conventions of this class calculate the number of days

between two dates (e.g., between Date1 and Date2) as
the Julian dierence. This is the function Days(StartDate,
EndDate).

Actual/Actual comparison, EMU and Market Conventions: Recent Developments.[4]

The conventions are distinguished primarily by the 4.2 Actual/Actual ISDA

amount of the CouponRate they assign to each day of the
Formulas:
accrual period.

4.1

Actual/Actual ICMA

Formulas:

Factor =

Days(Date1, Date2)
Freq Days(Date1, Date3)

For regular coupon periods:

Factor =

Days not in leap year Days in leap year

+
365
366

This convention accounts for days in the period based on

the portion in a leap year and the portion in a non-leap
year.
The days in the numerators are calculated on a Julian day
dierence basis. In this convention the rst day of the
period is included and the last day is excluded.

The CouponFactor uses the same formula, replacing

Date2 by Date3. In general, coupon payments will vary
1
CouponFactor =
from period to period, due to the diering number of
Freq
days in the periods. The formula applies to both regular
For irregular coupon periods, the period has to be divided and irregular coupon periods.
into one or more quasi-coupon periods (also called no- Other names are:
tional periods) that match the normal frequency of payment dates. The interest in each such period (or par Actual/Actual
tial period) is then computed, and then the amounts are
summed over the number of quasi-coupon periods. For
Act/Act
details, see (Mayle 1993) or the ISDA paper.[4]
Actual/365
This method ensures that all coupon payments are always
for the same amount.
Act/365

4 ACTUAL METHODS

Sources:
ISDA 2006 Section 4.16(b).[6]

Act/360
A/360
French

4.3

Actual/365 Fixed

Formulas:

Sources:
ICMA Rule 251.1(i) (not sterling).[7]

ISDA 2006 Section 4.16(e).[6]

Days(Date1, Date2)
Factor =
365
(Mayle 1993)
Each month is treated normally and the year is assumed
to be 365 days. For example, in a period from February
1, 2005 to April 1, 2005, the Factor is considered to be 4.5 Actual/364
59 days divided by 365.
Formulas:
The CouponFactor uses the same formula, replacing
Date2 by Date3. In general, coupon payments will vary
Days(Date1, Date2)
from period to period, due to the diering number of
Factor =
days in the periods. The formula applies to both regular
364
and irregular coupon periods.
Each month is treated normally and the year is assumed
Other names:
to be 364 days. For example, in a period from February
1, 2005 to April 1, 2005, the Factor is considered to be
Act/365 Fixed
59 days divided by 364.
A/365 Fixed
A/365F
English

The CouponFactor uses the same formula, replacing

Date2 by Date3. In general, coupon payments will vary
from period to period, due to the diering number of
days in the periods. The formula applies to both regular
and irregular coupon periods.

Sources:
ISDA 2006 Section 4.16(d).[6]
(Mayle 1993)

4.4

Actual/360

Formulas:
Days(Date1, Date2)
360
This convention is used in money markets for short-term
lending of currencies, including the US dollar and Euro,
and is applied in ESCB monetary policy operations. It is
the convention used with Repurchase agreements. Each
month is treated normally and the year is assumed to be
360 days. For example, in a period from February 1,
2005 to April 1, 2005, the Factor is 59 days divided by
360 days.
Factor =

4.6 Actual/365L
Formulas:

Factor =

Days(Date1, Date2)
DiY

This convention requires a set of rules in order to determine the days in the year (DiY).
If Freq = 1 (annual coupons):
If February 29 is in the range from Date1 (exclusive) to Date3 (inclusive), then DiY = 366,
else DiY = 365.
If Freq <> 1:
If Date3 is in a leap year, then DiY = 366, else
DiY = 365.

The CouponFactor uses the same formula, replacing

Date2 by Date3. In general, coupon payments will vary
from period to period, due to the diering number of
days in the periods. The formula applies to both regular
and irregular coupon periods.

The CouponFactor uses the same formula, replacing

Date2 by Date3. In general, coupon payments will vary
from period to period, due to the diering number of
days in the periods. The formula applies to both regular
and irregular coupon periods.

Other names:

Other names:

4.8

1/1

ISMA-Year

of the few cases where they dier. The simple rule illustrated here is based on subtraction of n years from Date2,
where subtracting whole years from a date goes back to
Sources:
the same day-of-month, except if starting on 29 February and going back to a non-leap year then 28 February
ICMA Rule 251.1(i) (Euro-sterling oating-rate
results.
[7]
notes).
Sources:

4.7

Actual/Actual AFB

Formulas:

Denitions Communes plusieurs Additifs Techniques, by the Association Francaise des Banques
in September 1994.[8]

Days(Date1, Date2)
Factor =
DiY

FBF Master Agreement for Financial Transactions,

Supplement to the Derivatives Annex, Edition 2004,
section 7i.[9]

This convention requires a set of rules in order to determine the days in the year (DiY).

Actual/Actual comparison, EMU and Market Conventions: Recent Developments.[4]

The basic rule is that if February 29 is in the range from

Date1 (inclusive) to Date2 (exclusive), then DiY = 366,
4.8
else DiY = 365.

1/1

If the period from Date1 to Date2 is more than one year,

This is used for ination instruments and divides the overthe calculation is split into two parts:
all 4-year period distributing the additional day across all
4 years i.e. giving 365.25 days to each year.
the number of complete years, counted back from
Sources:
the last day of the period
the remaining initial stub, calculated using the basic
rule.
As an example, a period from 1994-02-10 to 1997-06-30
is split as follows:
1994-06-30 to 1997-06-30 = 3 (whole years calculated backwards from the end)
1994-02-10 to 1994-06-30 = 140/365
Resulting in a total value of 3 + 140/365.
This convention was originally written in French and
during translation the term Priode d'Application was
converted to Calculation Period. As ISDA assigns a
very specic meaning to Calculation Period (Date1 to
Date3) confusion can ensue. Reading the original French,
the period referred to is Date1 to Date2, not Date1 to
Date3.[8]
The original French version of the convention contained
no specic rules for counting back the years. A later
ISDA paper [4] added an additional rule: When counting
backwards for this purpose, if the last day of the relevant
period is 28 February, the full year should be counted
back to the previous 28 February unless 29 February exists, in which case, 29 February should be used. No
source can be found explaining the appearance or rationale of the extra rule. The table below compares the later
ISDA count back rule to a simple count back rule (which
would have been implied by the original French) for one

ISDA 2006 Section 4.16(a).[6]

FBF Master Agreement for Financial Transactions,
Supplement to the Derivatives Annex, Edition 2004,
section 7a.[9]

5 Discussion
5.1 Comparison of 30/360 and Actual/360
The 30/360 methods assume every month has 30 days and
each year has 360 days. The 30/360 calculation is listed
on standard loan constant charts and is now typically used
by a calculator or computer in determining mortgage payments. This method of treating a month as 30 days and a
year as 360 days was originally devised for its ease of calculation by hand compared with the actual days between
two dates. Because 360 is highly factorable, payment frequencies of semi-annual and quarterly and monthly will
be 180, 90, and 30 days of a 360-day year, meaning the
payment amount will not change between payment periods.
The Actual/360 method calls for the borrower for the actual number of days in a month. This eectively means
that the borrower is paying interest for 5 or 6 additional
days a year as compared to the 30/360 day count convention. Spreads and rates on Actual/360 transactions are
typically lower, e.g., 9 basis points. Since monthly loan
payments are the same for both methods and since the

8 FURTHER READING

investor is being paid for an additional 5 or 6 days of interest with the Actual/360 year base, the loans principal
is reduced at a slightly lower rate. This leaves the loan
balance 1-2% higher than a 30/360 10-year loan with the
same payment.

5.2

Business date convention

Date rolling (business date) conventions are a common

practice to adjust non-business days into business days.

EMU and Market Conventions: Recent Developments

(PDF), 1998, retrieved 2007-07-31. ISDAs discussion of market convergence, including an extensive
discussion of irregular coupon periods.
FBF Master Agreement for Financial Transactions,
Supplement to the Derivatives Annex, Edition 2004
(PDF), 2004, retrieved 2014-09-13. Denition of
various day counts in section 7.

8 Further reading
6

Footnotes

[1] Investopedia denition. investopedia.com.

[2] see the treatment of 30/360 in (Mayle 1993).
[3] the ISDA 2006 vs. ISDA 2000 denitions, for instance.
[4] EMU and Market Conventions: Recent Developments
(PDF). 1998. Retrieved 2014-09-18.
[5] Practical Issues Arising from the Introduction of the Euro
- Issue 7 (PDF). 12 March 1998. Retrieved 2014-09-18.
[6] ISDA Denitions, Section 4.16 (PDF). 2006. Retrieved
2014-09-18.
[7] ICMA Rule Book, Rule 251 (PDF). Retrieved 201409-18.
[8] Bulletin Ociel d la Banque de France, Dnitions communes a plusieurs additifs techniques (PDF). January
1999. Retrieved 2014-09-18. |section= ignored (help)
[9] FBF Master Agreement for Financial Transactions, Supplement to the Derivatives Annex, Edition 2004 (PDF).
2004. Retrieved 2014-09-18.

References
Mayle, Jan (1993), Standard Securities Calculation Methods: Fixed Income Securities Formulas
for Price, Yield and Accrued Interest 1 (3rd ed.),
Securities Industry and Financial Markets Association, ISBN 1-882936-01-9. The standard reference
for conventions applicable to US securities. For the
30/360 US convention, this edition adds the rst two
rules to those given in earlier editions.
ICMA Rule Book, Rule 251 (PDF), retrieved 200707-31. ICMA's denition of certain day count conventions.
ISDA Denitions, Section 4.16 (PDF), 2006. ISDAs
denition of certain day count conventions. Note
that these denitions dier in some cases from the
ISDAs Annex to the 2000 Denitions.

Bond Calculator. Online calculation of interest and

rate indicators with dierent day count conventions,
created by SIX Swiss Exchange.
Pricing of Game Options (in a market with stochastic interest rates) - Section Chapter II: A Little Bit of
Finance, Section 1: Brief introduction to Financial
Securities, from pages 26 to 33, formally mention
day count conventions.
Practical Issues Arising from the Introduction of the
Euro - Issue 7 (March 1998) - Chapter 4: Financial Markets and Exchanges: discusses European
nations day-count conventions and changes required
to unify the day-count conventions for the EU member states.
jFin pure Java open source implementation of nancial date arithmetic.
comparison of nancial day count convention used
in Excel and OOXML
Interest Rate Instruments and Market Conventions
Guide. A reference guide containing conventions
and market standards for the most common nancial instruments.
Day Count Conventions, 2007, retrieved 2007-0731. Web page on the history and context of day
count conventions, including a cross-reference.
Online Day Count Calculator. Online Day Count
Calculator for Common Conventions

Text and image sources, contributors, and licenses

9.1

Text

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