Clean price
Encyclopedia
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
.
When bond prices are quoted on a Bloomberg Terminal
or Reuters
they are quoted using the clean price. 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.
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
, the clean price is the price
Price
-Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...
of a bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
excluding any interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
that has accrued
Accrued interest
In finance, accrued Interest is the interest that has accumulated since the principal investment, or since the previous interest payment if there has been one already. For a financial instrument such as a bond, interest is calculated and paid in set intervals...
since issue or the most recent coupon payment. This is to be compared with the dirty price
Dirty price
The dirty price of a bond represents the value of a bond, exclusive of any commissions or fees. The dirty price is also called the "full price" or the "all in price."-Bond Pricing:...
, which is the price of a bond including the accrued interest
Accrued interest
In finance, accrued Interest is the interest that has accumulated since the principal investment, or since the previous interest payment if there has been one already. For a financial instrument such as a bond, interest is calculated and paid in set intervals...
.
When bond prices are quoted on a Bloomberg Terminal
Bloomberg Terminal
The Bloomberg Terminal is a computer system provided by Bloomberg L.P. that enables financial professionals to access the Bloomberg Professional service through which users can monitor and analyze real-time financial market data movements and place trades on the electronic trading platform...
or Reuters
Reuters
Reuters is a news agency headquartered in New York City. Until 2008 the Reuters news agency formed part of a British independent company, Reuters Group plc, which was also a provider of financial market data...
they are quoted using the clean price. 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.