Day-Count Convention

Day-Count Convention

An assumption used to calculate the frequency of coupon payments for a bond. This is used to calculate accrued interest and may therefore be important to the valuation of a bond, especially just before or just after the coupon date. There are two main day-count conventions. The 30/360 convention assumes that there are 30 days each month and 360 days in a year. On the other hand, the actual/actual convention uses the real number of days each month and year.