Snowgold Date Calculator
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Download the Snowgold Date Calculator (190 KB) for Windows.
When specifying payment dates and interest rates on swaps and bonds, it is very important that both sides of the transaction agree on dates when payments will occur and on how the amounts payable will be calculated. The Snowgold Date Calculator demonstrates some of the more common payment and day count conventions. Please note, that as no holiday calendars have been provided, the dates produced only serve as an illustration of the conventions. Descriptions of the conventions are given on the right.
Payment Date Conventions
The most common procedure is known as Modified Following. Under this convention, when a payment date falls on a weekend or bank holiday, the next good business day should be picked as long as it is in the same calendar month. If the weekend causes the payment date to roll into the next month, the payment date is moved back to the last good business date of the previous month.
Following means that the next good business day is used, regardless of whether it is in the same month as the original date.
Preceding means that the closest previous business day is picked.
Using the end of month convention would involve picking the last good business day in the month.
International Money Market or IMM days are the third Wednesday in March, June, September and December.
Day Count Conventions
When calculating the interest payment due on an interest rate swap, you need to know the interest rate, either fixed or floating, the nominal amount (normally fixed, but can change with time, see accreting and amortizing swaps in the Snowgold Financial Glossary), and the period over which this interest rate is to be calculated. The day count fraction, is the fraction of a year since the previous payment on the swap was made. A number of day count conventions exist as detailed below.
Actual/Actual, means that the numerator is the number of days between the two dates. The denominator is the actual number of days in the coupon period multiplied by the coupon frequency. This is mainly relates to bonds. This normally results in day count factors of 1.0 for annual coupons, 0.5 for semi annual coupons and 0.25 for quarterly coupons.
Actual/365(Fixed), known as bond basis in the United States, means that the day count fraction is equal to the number of days between the last payment date and the next date divided by 365.
Actual/360, known in the United States as money market basis, has a day count fraction equal to the number of days between the payment dates, divided by 360.
30/360, means that day count fractions are calculated assuming 30 day months and 360 days in a year. The second date is only adjusted if the first date is on the 31st of a month.
30E/360, means that day count fractions are calculated assuming 30 day months and 360 days in a year. In this case, the second date is always adjusted to the 30th, if it is the 31st.
30E+/360, means that day count fractions are calculated assuming 30 day months and 360 days in a year. If the second date is on the 31st, it is adjusted to the 30th and an second month is incremented by one.
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