Why a Coupon Bond’s Accrued-Interest Price Is Dirty

Summary

The document asks whether a one-year coupon bond valuation on a date between coupon payments represents a clean or dirty price. The example discounts the next coupon and the later principal-plus-coupon payment at the stated yield over the remaining fractions of a year. The reply classifies the result as a dirty price because the valuation includes accrued interest associated with the elapsed portion of the coupon period.

The underlying distinction is that a clean bond quote excludes accrued interest, while the dirty or invoice price includes it. The example highlights that the accrued coupon component is part of the amount being valued between payment dates. The document gives a brief classification, not a full derivation of the discounting convention or a worked comparison between clean and dirty prices. It also does not discuss day-count rules, compounding conventions, or settlement details, all of which can affect practical bond pricing. Its explanation is limited to the stated coupon setup and formula.

Key ideas

• The dirty price includes accrued interest between coupon payment dates.
• The clean price excludes accrued interest from the quoted bond value.
• The example’s valuation includes a coupon component representing accrued interest, so the reply identifies it as dirty.
• Actual bond calculations can depend on day-count, discounting, and settlement conventions not covered here.

Tags

# This is the dirty price or clean price


# This is the dirty price or clean price












A one year bond of principle 100, coupon 6% with half year paying and yield 11%. Suppose the beginning day of bond is 1.1 and today is 3.1, then I want to ask that, the price $$c = \dfrac{3}{e^{0.11 * 0.25}} + \dfrac{103}{e^{0.11 * 0.75}}$$ is the dirty price or clean price?

## Answer by Prateek Sanjay (score 0)

https://quant.stackexchange.com/a/35499

It is the dirty price, since it includes accrued interest, as represented by the first part of the equation.

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