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FWIW, being off by 10s of dollars sounds to me like different ideas of how to count days. Banks sometimes use calendar days, sometimes business days, and somet
by cperciva 3y ago
FWIW, being off by 10s of dollars sounds to me like different ideas of how to count days. Banks sometimes use calendar days, sometimes business days, and sometimes a fictitious calendar with 12 months of 30 days each.
- fadesibert 3y agoBTW - the fictitious calendar is very often used in bond repayments - e.g. https://www.lawinsider.com/dictionary/bond-payment-dates https://www.lawinsider.com/dictionary/bond-payment-dates It has historically been used to allow for bonds to have uniform repayments across maturities (when the principal of a bond becomes due) - useful in the context of a bank wanting to hedge risks such as interest rate risk, repayment risk (if the bond is callable it can be paid back early, which means the bondholders have cash yielding ~0% instead of whatever the bond yield was) Mortgages, though not traditional bonds (in that it's not a sophisticated company borrowing) are, depending on the jurisdiction, treated as bonds because they get packaged up and sold as bonds - the underlying bit of financial engineering that, after serious perversion, gave us the 2008 credit crisis
- throw0101d 3y ago> BTW - the fictitious calendar is very often used in bond repayments - e.g. https://www.lawinsider.com/dictionary/bond-payment-dates https://www.lawinsider.com/dictionary/bond-payment-dates Some sample calculations at: * https://www.bondsavvy.com/bonds/accrued-interest-calculation https://www.bondsavvy.com/bonds/accrued-interest-calculation See also perhaps: * https://www.investopedia.com/terms/d/daycount.asp https://www.investopedia.com/terms/d/daycount.asp
- jbs769 3y agoHaving been through this exercise as a former employee of a bank calculating this exact thing, this makes sense to me so is hopefully helpful for the poster.
- burnished 3y agoYes, you'd call that the calendar convention if I remember correctly. The one you are referencing is called 30/360 for 30 days in a month, 360 days in a year.
- MichaelZuo 3y agoWould different departments within a bank use different calendar conventions?
- cperciva 3y agoAbsolutely. Even within one department, since accounts often originated from different institutions.
- burnished 3y agoGood question! I don't know, though it wouldn't surprise me if different products offered by the same bank used different calendar conventions. Calendar conventions are an accounting practice though, so different departments wouldn't interpret the same loan differently due to differing conventions.