Bond Clean and Dirty Prices: Accrued Interest and Yield Calculations

Summary

The document presents a bond pricing mismatch: a fixed-coupon bond's calculated price is about a dollar away from a Bloomberg screen, and the questioner suspects the day-count convention. The accepted response says the quoted value appears correct and points instead to accrued interest. Because settlement occurs between coupon dates, interest has accrued since the previous payment; adding it can account for a difference of roughly the size described.

The explanation highlights the distinction between clean and dirty prices. A clean price excludes accrued interest, while a dirty price includes it and reflects the cash amount paid or received at settlement. The example makes accrued interest a key check when comparing a hand calculation with a market screen. It does not provide the C# function, a full pricing formula, or a detailed Bloomberg convention setup, so it does not establish that day-count settings are irrelevant in other cases. Differences in conventions and quote presentation still need to be checked when matching prices.

Key ideas

• A bond's dirty price includes accrued interest, while its clean price excludes accrued interest.
• Accrued interest between coupon dates can explain a noticeable difference in settlement price.
• The example points to accrued interest as the likely source of the reported pricing gap.
• A market price comparison should account for whether each quoted price is clean or dirty.
• The response does not detail the pricing function or all market convention settings.

Tags

# Need to match my bond price calculation to that of Bloomberg, currently failing hard


# Need to match my bond price calculation to that of Bloomberg, currently failing hard












I have a fixed-coupon bond with the following characteristics:

```
Settlement: 11 July 2013
Maturity: 4 April 2022
Face Value: 100
YTM: 4.24403 %
Coupon: 4.08 %
Coupon Frequency: Annual
Day Count Convention: Actual/360
```

I have a C# function that according to my Bloomberg screen should churn out a price of $98.8073, but I just can't seem to get it right. Could someone please show me a paper or some code that would fix this problem? I'm only off with about a dollar so I think I'm doing something wrong with how I handle the day count.

Thanks in advance!

## Answer by Matt Wolf (score 2, accepted)

https://quant.stackexchange.com/a/8433

I see 98.81 as well, so that is definitely correct.

From hearing that you are about a dollar off it looks to me as if you may have omitted accrued interest which should come to around that value given the last coupon payment date was in April and settlement is in the middle of July and a coupon of around 4 dollars.

Note the distinction between clean vs. dirty bond prices, one includes accrued interest the other not. Generally the true price of a bond includes accrued interest because that will have you arrive at the net price you end up paying/receiving for the bond.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.