In finance, the clean price is the price of a bond excluding any interest that has accrued since issue or the most recent coupon payment. This is to be compared with the dirty price, which is the price of a bond including the accrued interest.
Clean Price = Dirty Price - Accrued Interest
When bond prices are quoted on a Bloomberg Terminal or Reuters they are quoted using the clean price. The clean price is mostly quoted in the US bond markets. Given the quotes, traders tend to think of bonds in terms of their clean prices.
Clean prices are more stable over time than dirty prices – when clean prices change, it is for an economic reason, for instance a change in interest rates or in the bond issuer's credit quality. Dirty prices, on the other hand, change day to day depending on where the current date is in relation to the coupon dates, in addition to any economic reasons.
|
Famous quotes containing the words clean and/or price:
“Kings and queens who wear a suit but once, though made by some tailor or dressmaker to their majesties, cannot know the comfort of wearing a suit that fits. They are no better than wooden horses to hang the clean clothes on.”
—Henry David Thoreau (1817–1862)
“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)