The convention for calculating interest on an interest rate derivative is to multiply the notional principal times the payoff function times 90 over 360 or 365.

Question

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The convention for calculating interest on an interest rate derivative typically involves multiplying the notional principal by the interest rate and the day count fraction, which is the actual number of days in the period divided by the basis (360 or 365), not a fixed 90 days.

The Convention for Calculating Interest on an Interest Rate Derivative