Whenever you work with market data you have to take into account the conventions that come along with them. There are quite many of them and they have to be checked case by case. In this course, I will focus on 2 particular ones. First is the day-count convention. How do we measure time between 2 calendar dates? And the second one is about clean and dirty prices, and accrued interest. And that addresses the issue that at the coupon payments, you have systematic price jumps of coupon bonds. By convention, we measure the time in units of years. But what is the time Δ in units of years between say, the calendar dates 4th of January, 2000 and the 4th of July, 2002. The market in fact evaluates the year fraction between the calendar dates t and T in different ways. These are the day count conventions. Here are some of the most popular day count conventions. Actual over 365. Here the year has 365 days and the year fraction is given by the actual number of days between the calendar dates t and T divided by 365. Another convention is actual over 360. It's as above but the year counts 360 days. Then there is the 30 over 360 convention. Here every month counts 30 days and years count 360 days. That is, formally speaking, for calendar dates t which is day 1, month 1, year 1 and T which is day 2, month 2, year 2. We have to cap the 31st of the months otherwise we divide the difference of months by 12 and the difference of the years they counted 14. It is best to look at an example and resume the calendar dates the 4th of January, 2000 and the 4th of July 2002. The time between these 2 dates amounts to 2.5 in the 30 over 360 convention And then the actual over 365 convention the time amounts to 2.4986. Note that while this may look like a tiny difference, remember that the outstanding notional in this interest rate contract is huge. So even a 2nd digit difference in the day count convention can translate into thousands of units of currency. Recall that the coupon bond price is given as X dividend cost. That means there are systematic discontinuities of the bond price trajectory at the coupon payment dates. For illustration, look at this stylized example of a bond with maturity of 5 years, annual coupons of 5 percent on the principle of 100. The price of the bond typically increases towards the first coupon payment and then is suddenly reduced by the payment of 5. And then again increases to the next coupon payment, jumps down by 5 and so on and so forth until you arrive at the principle 100. In order to remedy these price trajectory jumps you compute what is called the accrued interest on the coupon C-i. It is given by this following pro rata formula. If we subtract the accrued interest from the X dividend bond price we arrive at what we call the clean price. The clean price in our stylized example will have a smooth trajectory bringing us down to the principle of 100. Dirty price in turn is what we call X dividend bond price which in terms of the clean price is given by adding the accrued interest. The clean price is sometimes what is quoted. In any case, the dirty price is definitely what you will have to pay.