Development
The need for day count conventions is a direct consequence of interest-earning investments. Different conventions were developed to address often conflicting requirements, including ease of calculation, constancy of time period (day, month, or year) and the needs of the Accounting department. This development occurred long before the advent of computers.
There is no central authority defining day count conventions, so there is no standard terminology. Certain terms, such as "30/360", "Actual/Actual", and "money market basis" must be understood in the context of the particular market.
The conventions have evolved, and this is particularly true since the mid-1990s. Part of it has simply been providing for additional cases or clarification.
There has also been a move towards convergence in the marketplace, which has resulted in the number of conventions in use being reduced. Much of this has been driven by the introduction of the euro.
Read more about this topic: Day Count Convention
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