Template:Business day conventions

Business day conventions for your reading pleasure

How one adjusts the calculation period for a given interest coupon to account for the fact that it ends on a non-working day, and that therefore the interest payment can’t be made on schedule.

• No adjustment business day convention: The keep calm and carry on option: non-workdays of any kind are effectively ignored. Cashflows falling on non-workdays are assumed to be distributed on the actual date.
• Previous business day convention: Back to the day before: Cashflows falling on non-workdays are assumed to be distributed on the previous business day.
• Following business day convention: Cashflows falling on a non-workday are assumed to be distributed on the next business day.
• Modified previous business day convention: Cashflows falling on a non-workday are assumed to be distributed on the previous business day unless it would fall in a different month, in which case it’s the next business day.
• Modified following business day convention: Cashflows falling on a non-workday are assumed to be distributed on the next business day unless it would fall in a different month, in which case it’s the previous business day.

End of month - no adjustment business day convention: All cashflows are assumed to be distributed on the final day of the month (even if it is not a workday).

End of month - previous business day convention: All cashflows are assumed to be distributed on the final day of the month unless it is not a workday, in which case it's the previous business day.

End of month - following business day convention: All cashflows are assumed to be distributed on the final day of the month unless it is not a workday, in which case it's the next business day.