Day Count and Accrued Interest Calculations

The price of a bond is a function of its underlying cash flows. Cash flows are paid in the form of interest payments. A change in the days basis can lead to a change the price of the bond. We discuss the accrual periods over which interest is compounded, and how the number of days in a year differs between the money and bond markets. We then see how you go about adjusting from one days basis to another.