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Business Day Conventions

The selection for business day convention determines how non-business days are treated. The conventions supplied by Resolution are defined below.

 

Convention

Definition

.

No Adjustment

Business Holidays are effectively ignored. Cash flows that fall on holidays are assumed to be distributed on the actual date.

Previous

Cash flows that fall on a non-business day are assumed to be distributed on the previous business day.

Following

Cash flows that fall on a non-business day are assumed to be distributed on the following business day.

Modified Previous

Cash flows that fall on a non-business day are assumed to be distributed on the previous business day. However if the previous business day is in a different month, the following business day is adopted instead.

Modified Following

Cash flows that fall on a non-business day are assumed to be distributed on the following business day. However if the following business day is in a different month, the previous business day is adopted instead.

End of Month - No Adjustment

All cash flows are assumed to be distributed on the final day of the month (even if it is a non-business day).

End of Month - Previous

All cash flows are assumed to be distributed on the final day of the month. If the final day of the month is a non-business day, the previous business day is adopted.

End of Month - Following

All cash flows are assumed to be distributed on the final day of the month. If the final day of the month is a non-business day, the following business day is adopted.

 

 

Non-business days are defined as weekends plus any other date that businesses are not open (e.g. statutory holidays). Although in the Western world, business days are Monday-Friday, in many Arab countries this is not the case, e.g. Kuwait and Abu Dhabi business days are Saturday-Wednesday, while Egypt and Jordan have business days of Sunday-Thursday. As a result, Resolution allows the days of the week that constitute a weekend to be customized. If you require this functionality please email enquiry@myhedgebook.com.

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