Convexity Bias in the Pricing of Interest Rate Swaps

For example, in the USD swap market, the day count is 30/360 with semi-annual payments; in the DEM market, it is 30/360 with annual payments, while in the JPY market, the day-count convention is Actual/365 with semi-annual payments. The underlying floating rate also varies across currencies; for instance, in the case of the USD swap market, it was the six-month LIBOR. ................
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