Interest day method
The interest day method, for example, specifies the method used to calculate the interest days for bonds.
Bonds are normally traded not only on interest dates, but throughout the year. In order to calculate the correct accrued interest share for buyer and seller, a calculation method must be agreed upon.
The interest day method selected also influences the yield calculation. In general, however, the differences between the various methods are only minor.
In addition to the interest days of bonds, accrued interest and account interest can also be calculated using these methods.
The Infront Portfolio Manager distinguishes between the following calculation methods:
| Method | Description |
|---|---|
30/360 | With this simplified method, the year is divided into 12 equal months of 30 days each, regardless of the actual number of days in a month. With this "simplified" procedure, you can also easily carry out "manual" calculations with the calculator. The 31st of a month is therefore set to the 30th. Remaining days are subtracted. Special case: There is no adjustment at the end of February, so 28 days are counted here, or 29 days in leap years. The year is calculated with 360 days (denominator, divisor). Formula: D=(y2-y1)*360+(m2-m1)*30+(d2-d1) where: Beispiel 1. April to May 1 with quarterly interest payments and an interest rate p: Accrued interest = p*(30/360) |
act/act (ISMA-251) | Corresponds to the previous value act/act. With this calculation method of the International Securities Market Association, the actual number of days elapsed is counted. The year is calculated with real days of the interest period (times the number of interest periods per year). Beispiel 1. April to May 1 with quarterly interest payments and an interest rate p: Accrued interest = p*(30/91*4) = p*(30/364) If you create a bond manually, this calculation method is initially assumed to be the default. |
act/360 | With this simplified method, interest is calculated on a daily basis, but the year is then rounded to 360 days. Beispiel 1. May to June 1 with quarterly interest payments and an interest rate p: Accrued interest = p*(31/360) |
act/365 | The days that have actually elapsed are counted. The year is counted as 365 days. Beispiel 1. April to May 1 with quarterly interest payments and an interest rate p: Accrued interest = p*(30/365) |
act/act (ISDA) | The calculation is based on the number of actual anniversaries (leap year 366, normal year 365). If a transaction falls in two years, one of which is a leap year, the interest calculation is divided into two parts. Beispiel 1. July 2019 to June 30, 2020 with annual interest payments and an interest rate p: Accrued interest = p*(184/365)+p*(181/366) |
act/act (AFB) | The days that have actually elapsed are counted. To calculate the length of the underlying year, one year is calculated back from the end of the calculation period. Beispiel Example: 1. July 2019 to August 1, 2019 with annual interest payment and interest rate p: Accrued interest = p*(31/366) |
flat | No separate accrued interest is paid for the bond. In the case of coupon payments, the portion of the coupon accrued since the last coupon payment is included in the market value of the bond. |
n/a | No calculation method stored. |
You will encounter these methods at various points in the program, e.g. in the master data of bonds, in the bond calculator or for account interest, accrued interest or fixed-term deposits.
For special features of the "bond" security type, please also read the section Bond master data.