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, dirty and/or price:
“There is a rhythm to the ending of a marriage just like the rhythm of a courtship—only backward. You try to start again but get into blaming over and over. Finally you are both worn out, exhausted, hopeless. Then lawyers are called in to pick clean the corpses. The death has occurred much earlier.”
—Erica Jong (b. 1942)
“Out in Hollywood, where the streets are paved with Goldwyn, the word “sophisticate” means, very simply, “obscene.” A sophisticated story is a dirty story. Some of that meaning was wafted eastward and got itself mixed up into the present definition. So that a “sophisticate” means: one who dwells in a tower made of a DuPont substitute for ivory and holds a glass of flat champagne in one hand and an album of dirty post cards in the other.”
—Dorothy Parker (1893–1967)
“... we performers are monsters. We are a totally different, far-out race of people. I totally and completely admit, with no qualms at all, my egomania, my selfishness, coupled with a really magnificent voice.”
—Leontyne Price (b. 1927)