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:
“When long ago I saw her ride
Under Ben Bulben to the meet,
The beauty of her country-side
With all youth’s lonely wildness stirred,
She seemed to have grown clean and sweet
Like any rock-bred, sea-borne bird....”
—William Butler Yeats (1865–1939)
“Perhaps the fact that I am not a Radical or a believer in the all powerful ballot for women to right her wrongs and that I do not scorn womanly duties, but claim it as a privilege to clean up and sort of supervise the room and sew things, etc., is winning me stronger allies than anything else.”
—Ellen Henrietta Swallow Richards (1842–1911)
“the horsemen came
Again, all but the leader: it was night
Momently and I feared: eleven same
Jesus-Christers unmembered and unmade,
Whose Corpse had died again in dirty shame.”
—Allen Tate (1899–1979)
“How long most people would look at the best book before they would give the price of a large turbot for it?”
—John Ruskin (1819–1900)