Day Count Conventions Every ACI Candidate Must Know.

Stop Losing Easy Marks in the Rates Section

Day count conventions are not exciting.

But they are exam gold.

In the ACI Dealing Certificate, day count errors are one of the most common reasons candidates drop marks in:

• Money markets

• Deposits

• FRAs

• Bonds

• Interest rate swaps

  
  

The maths is rarely difficult.

The mistake is usually using the wrong denominator.

Let’s fix that properly.

1️⃣ What Is a Day Count Convention?

A day count convention determines:

• How interest accrues

• How many days are counted in a period

• What denominator is used (360 or 365)

• 
  

Basic interest formula:

Interest = Principal × Rate × (Days / Day Count Basis)

If you use the wrong basis, the answer is wrong.

It's as simple as that.

2️⃣ The Core Conventions You Must Know

For the ACI exam, these are essential:

ACT / 360

Used in:

• Money market deposits (USD, EUR interbank)

• FRAs

• Short-term money markets

• 
  

Formula: Notional x Days counted exactly / Denominator (here it is 360)

$10,000,000 at 4.20% for 92 days (ACT/360)

Interest = 10,000,000 × 0.042 × (92/360)= $107,333

If you use 365 by mistake, you lose the mark.

ACT / 365 (Fixed)

Common in:

• GBP money markets

• Some Commonwealth currencies

Notional x Days counted exactly / Denominator (here it is 365)

This small difference materially changes the answer.

Exam trap: Mixing ACT/360 and ACT/365 in cross-currency questions.

30 / 360

Used mainly in:

• Corporate bonds

• Some structured products

• 
  

Each month assumed to have 30 days. The year is assumed to have 360 days.

Cleaner for bond coupon calculations.

Exam trap: Candidates accidentally use ACT instead of 30.

ACT / ACT

Used in:

• Government bonds (varies by country)

  
  

More complex because:

• Uses actual days

• Denominator may change in leap years

  
  

The ACI usually keeps ACT/ACT straightforward — but you must recognise it.

3️⃣ Where the Exam Catches Candidates

The ACI exam does not ask:

“What is ACT/360?”

It gives you a calculation scenario.

Example:

A bank places USD 5,000,000 at 5% for 120 days.

You must automatically know that the USD money market = ACT/360

The question may not remind you.

That’s the trap.

4️⃣ Why Day Count Really Matters

In real markets, day count conventions affect:

• FRA settlement

• Swap valuation

• Money market yield comparison

• Cross-currency pricing

• P&L calculations

• 
  

In the exam, it tests whether you think like a dealer.

Dealers don’t guess denominators.

They know them.

5️⃣ Quick Reference Table (Memorise This)

Instrument	Typical Day Count
USD Money Market	ACT/360
EUR Money Market	ACT/360
GBP Money Market	ACT/365
Corporate Bonds	30/360
Government Bonds	ACT/ACT

This table alone saves marks.

6️⃣ The Most Common Mistakes

Let’s be direct.

Candidates lose marks because they:

• Use 365 instead of 360

• Forget to convert days properly

• Ignore leap years when ACT/ACT applies

• Mix up bond conventions with money markets

• Rush the denominator

7️⃣ The Exam Mindset Shift

When you see a rates calculation:

Pause.

Ask:

1. What instrument is this?

2. What currency?

3. What convention applies?

4. What is the denominator?

Only then calculate.

That 5-second pause prevents 50% of avoidable errors.

8️⃣ Final Advice for ACI Candidates

Day count questions are mechanical.

That is good news.

Mechanical questions reward preparation.

If you:

• Memorise the core conventions

• Practise full interest calculations

• Slow down before choosing 360 or 365

You turn a common weakness into guaranteed marks.

And remember:

In the ACI Dealing Certificate, you must pass each section individually.

Small calculation errors matter.

Control the mechanics. Protect the marks.

If you're preparing for the ACI Dealing Certificate (New Version) and want structured mock exams, worked interest calculations and realistic exam scenarios, explore the full SwapSkills programme here:

👉 https://swapskills.teachable.com/p/aci-dealing-certificate-new-version1-1

FX Spot, Forwards and Swaps Explained For The ACI Dealing Certificate Exam

If you are preparing for the ACI Dealing Certificate, FX is not optional knowledge.

It is core.

And within FX, three instruments dominate exam questions:

• Spot

• Forwards

• Swaps

• 
  

Candidates usually understand them conceptually.Where they lose marks is in pricing, value dates, forward points, and swap mechanics.

Let’s strip this back to what you actually need to know to pass.

1️⃣ FX Spot – The Foundation

Definition:A spot transaction is an agreement to exchange one currency for another at an agreed rate, with settlement typically T+2 business days.

Example:

EURUSD = 1.1020 / 1.1023

This means:

• The dealer buys EUR at 1.1020

• The dealer sells EUR at 1.1023

• USD is the terms currency

• EUR is the base currency

• 
  

If a client buys EUR 5 million, they pay:

5,000,000 × 1.1023 = USD 5,511,500

What the ACI Exam Tests

• Bid/offer logic

• Base vs terms currency

• Value date conventions

• Holiday adjustments

• Cross-rate calculations

• 
  

Most mistakes happen because candidates rush the perspective question:

Who is buying what?

Slow down. Always identify base currency first.

2️⃣ FX Forwards – Interest Rate Differentials in Action

A forward is simply a spot transaction plus a forward adjustment.

The forward rate reflects the interest rate differential between the two currencies.

The formula logic:

Forward Rate = Spot ± Forward Points

If EUR interest rates are lower than USD rates, EURUSD will typically trade at a forward discount (points subtracted).

Example

Spot EURUSD = 1.10003-month forward points = -0.0025

Forward rate = 1.1000 – 0.0025= 1.0975

This does not mean EUR is “expected to fall.”It reflects covered interest parity.

What the ACI Exam Tests

• Adding vs subtracting forward points correctly

• Converting points (e.g., 25 points = 0.0025)

• Understanding premium vs discount

• Interest rate parity logic

• Swap point interpretation

  
  

Common trap:

Candidates add points when they should subtract.

Always look at the sign of the forward points.

3️⃣ FX Swaps – The Most Misunderstood Instrument

An FX swap is two FX transactions done simultaneously:

• One leg at spot (or near date)

• One leg at forward (far date)

• 
  

It is not a directional trade. It is a funding / liquidity instrument.

Example:

A bank does:

• Buy EUR spot

• Sell EUR 3-month forward

This creates a temporary EUR position that reverses at maturity.

Swaps are quoted in points, not outright rates.

Why Dealers Use Swaps

• Manage liquidity

• Roll positions

• Adjust value dates

• Fund foreign currency assets

  
  

What the ACI Exam Tests

• Swap structure (buy/sell logic on each leg)

• Which leg is near and which is far

• How forward points relate to interest rates

• Value date adjustments

  
  

Common trap:

Confusing which leg creates exposure and which leg neutralises it.

Remember:

A swap is a financing tool, not a speculation tool.

4️⃣ How the Exam Frames FX Questions

The ACI does not ask textbook definitions.

It frames practical dealing scenarios:

• A corporate needs to hedge a receivable

• A bank needs to roll a position

• A trader must calculate forward outright

• A dealer must quote two-way pricing

• 
  

You must think like a dealer, not a student.

That means:

• Identify base currency

• Identify who is price maker

• Apply bid/offer correctly

• Apply forward points correctly

• Stay calm with value dates

5️⃣ The Simple Framework That Prevents FX Errors

Whenever you see an FX question, follow this checklist:

1. Identify the currency pair.

2. Identify the base currency.

3. Identify who is buying.

4. Decide whether it is spot, forward, or swap.

5. Apply bid/offer logic.

6. Apply forward points correctly (if relevant).

7. 
   

If you follow that structure every time, your error rate drops dramatically.

Final Exam Advice

FX questions are highly mechanical.

That is good news.

Mechanical questions reward discipline.

If you:

• Master two-way pricing

• Understand forward point logic

• Understand swap structure

• Practise value date adjustments

You turn FX from a risk area into a scoring area.

And in a five-section exam where you must pass each section individually, that matters.

If you’re preparing for the ACI Dealing Certificate (New Version) and want structured mock exams, worked calculations, and realistic dealing scenarios, explore the full Swapskills programme here:

👉 https://swapskills.teachable.com/p/aci-dealing-certificate-new-version1-1

Precision beats speed.

Clarity beats panic.

Mechanics win marks.

Bid, Offer and Market Quoting: ACI Exam Essentials

One of the fastest ways to lose marks in the ACI Dealing Certificate exam is simple:

You read the quote correctly…

But you choose the wrong side.

It’s rarely a knowledge problem. It’s a perspective problem.

The exam assumes you instinctively understand:

• Who is the market maker

• Who is the client (price taker)

• Who is buying

• Who is selling

• Which side of the quote applies

If you hesitate on any of those, you’re at risk.

Let’s fix that properly.

1️⃣ How Examiners Frame Pricing Traps

The ACI exam does not test whether you know what a bid is.

It tests whether you understand who is doing what in a live market context.

Here’s how traps are typically framed:

Trap 1: Reversing the perspective

EURUSD is quoted 1.1720 / 1.1723.A client wants to buy EUR. At what price will the trade occur?

Many candidates see “buy” and instinctively choose the lower number.

Wrong.

You must ask:

• Who is buying? → The client

• Who is selling? → The market maker

• What price does the market maker sell at? → The offer

Correct answer: 1.1723

Trap 2: The wording twist

The exam may say:

The market is willing to sell euros at:

This is subtle.

It is not asking what the client pays. It is asking from the dealer’s perspective.

The market sells at the offer.

Again: 1.1723

One misread word and you lose the mark.

Trap 3: Switching base and terms

Candidates often forget that:

• In EURUSD, EUR is the base currency

• USD is the terms currency

• 
  

If you don’t anchor that first, confusion follows.

The exam loves exploiting that hesitation.

2️⃣ The Mindset Shift That Prevents Careless Mistakes

Most candidates move too quickly through pricing questions.

That is a mistake.

The correct mindset is:

Slow is smooth. Smooth is fast.

Before selecting an answer, force yourself to pause and ask three questions:

1. Who is the price maker?

2. Who is the price taker?

3. Who is buying what?

4. 
   

If you cannot clearly answer those three in your head, do not click.

The ACI exam rewards clarity, not speed.

When you train yourself to identify perspective first, pricing questions become mechanical rather than stressful.

3️⃣ The Simple Rule That Works Every Time

Here is the rule I teach all my candidates:

The dealer’s bid is their price to buy.

The dealer’s offer is their price to sell.

The client always gets the opposite side.

Let’s apply it cleanly:

EURUSD = 1.1720 / 1.1723

• Dealer buys EUR at 1.1720

• Dealer sells EUR at 1.1723

If the client:

• Buys EUR → pays 1.1723

• Sells EUR → receives 1.1720

  
  

That’s it.

No emotion. No guessing. No confusion.

Just perspective.

Why This Matters for the ACI Exam

The Dealing Certificate is not testing textbook definitions.

It is testing whether you can think like a dealer.

That means:

• Understanding two-way pricing instinctively

• Recognising market maker vs price taker dynamics

• Staying calm under subtle wording shifts

If you consistently get bid/offer questions wrong, it is not a knowledge gap.

It is a discipline gap.

And discipline is trainable.

Final Exam Tip

When you see a pricing question:

1. Circle (mentally) the currency pair.

2. Identify the base currency.

3. State who is buying.

4. State who is selling.

5. Then choose the side.

6. 
   

If you do that every time, you remove 90% of avoidable mistakes.

And in a multiple-choice exam, removing avoidable mistakes is how you move from 52% to 65%+.