Clean and Dirty Price
When the bond is not valued precisely on a coupon date, the calculated price, using the methods above, will incorporate accrued interest: i.e. any interest due to the owner of the bond since the previous coupon date; see day count convention. The price of a bond which includes this accrued interest is known as the "dirty price" (or "full price" or "all in price" or "Cash price"). The "clean price" is the price excluding any interest that has accrued. Clean prices are generally more stable over time than dirty prices. This is because the dirty price will drop suddenly when the bond goes "ex interest" and the purchaser is no longer entitled to receive the next coupon payment. In many markets, it is market practice to quote bonds on a clean-price basis. When a purchase is settled, the accrued interest is added to the quoted clean price to arrive at the actual amount to be paid.
Read more about this topic: Bond Valuation
Famous quotes containing the words clean and, clean, dirty and/or price:
“The intellectual life may be kept clean and healthful, if man will live the life of nature, and not import into his mind difficulties which are none of his.”
—Ralph Waldo Emerson (1803–1882)
“Ah my deare God! though I am clean forgot, Let me not love thee, if I love thee not.”
—George Herbert (1593–1633)
“We’re headed for collapse, if you want my opinion, Missy. I can see it in the fallin’ off of the quality of vagrants. There was a time you could find real good company in almost any jungle you’d pick, men who could talk, men who’d read a book now and then; and now, what do you find, a lot of dirty little guttersnipes no decent tramp would want to associate with.
Well, it’s been that way all through history.”
—John Dos Passos (1896–1970)
“The price on the wanted
poster was a-going down, outlaw alias copped my stance
and moody greenhorns were making me dance; while my mouth’s
shooting iron got its chambers jammed.”
—Ishmael Reed (b. 1938)