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Ex-Dividend Conventions

When a bond is said to trade ex-dividend it means that there is a period of time prior to each coupon payment during which a bond purchaser does not receive custody of the next coupon. That payment is made to the previous bond holder and accrued interest is therefore negative during the ex-dividend period.

Of the 20 sovereign bonds considered in this development, 5 trade on an ex-dividend basis. Each bond observes a different convention, as presented in the following table:

 

Country

 

Convention

 

If Settle Date =
Ex-Div Date

 

Australia

 

Begin to trade ex-dividend seven calendar days prior to the coupon date.

 

Bond trades ex-dividend

New Zealand

 

Begin to trade ex-dividend at the close of business on the tenth calendar day before the coupon date.

 

Bond trades cum-coupon.

South Africa

 

Begin to trade ex-dividend one calendar month prior to the coupon date. If the coupon date falls on the last day of a month, then the bond trades ex-dividend on the last day of the preceding month.

 

Bond trades ex-dividend

Sweden

 

Begin to trade ex-dividend at the end of trading five business days prior to the actual coupon payment date. If a nominal coupon date falls on a non-business day, then the payment date is set to the next good business day. The five day period is then deducted from this date.

 

Bond trades cum-coupon.

United Kingdom

 

Begin to trade ex-dividend at the close of business seven calendar days prior to the coupon date.

 

Bond trades cum-coupon.

 

 

 

 

 

The rule that is used to determine whether or not the bond is valued "cum-coupon" or "ex-dividend" on the ex-dividend date is dependent on the assumption made regarding the time of day for the valuation. All valuation functions supported by Resolution assume that the value is assessed just prior to the end of trading on the nominated settlement date. This means that if the bond begins to trade ex-dividend at the end of trading on a particular day, then the bond will be valued cum-dividend on that date.

 

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