Fixed Income Markets: Management, Trading and Hedging, 2nd Edition

Glossary

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30/360

An accrued interest calculation method that assumes 30 days in each month and 360 days in the year.

Accreting

An accreting principal is one that increases during the life of the deal. See amortising, bullet.

Accreting swap

Swap whose notional amount increases during the life of the swap (opposite of amortising swap).

Accrued benefit obligation

Present value of pension benefits that have been earned by an employee to date, whether vested in the employee or not. It can be an important measure when managing the asset/liability ration of pension funds.

Accrued interest

The proportion of interest or coupon earned on an investment from the previous coupon-payment date until the value date.

Accumulated value

The same as future value.

ACT/360

A day/year count convention taking the number of calendar days in a period and a “year” of 360 days.

ACT/365

A day/year convention taking the number of calendar days in a period and a “year” of 365 days. Under the ISDA definitions used for interest-rate swap documentation, ACT/365 means the same as ACT/ACT.

ACT/ACT

A day/year count convention taking the number of calendar days in a period and a “year” equal to the number of days in the current coupon period multiplied by the coupon frequency. For an interest-rate swap, that part of the interest period falling in a leap year is divided by 366 and the remainder is divided by 365.

Add-on factor

Simplified estimate of the potential future increase in the replacement ...