# Day count conventions

The day count conventions cover the way in which interest is calculated in the bond and money markets. In general terms:

The difficulty comes because, for calculation purposes, some markets consider all months to contain 30 days and some do not and some (but not necessarily the same) markets consider each year to contain 360 days rather than 365 (or 366 in a leap year).

If the wrong convention is used, small errors will be made. Whilst these errors may be small, they may also be the difference between profit and loss, so it is important that the correct convention is used.

The information on this page is provided as a guide. Care should be taken when issuing or investing such instruments to ensure that the daycount convention applies as expected.