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Brokers quote the dirty price, found by adding the clean price and accrued interest since that day. If the bond's last coupon payment was made on 1 June, on 1 September, the dirty price is: Clean Price + Accrued Interest (where accrued interest is the interest accumulated from 1 June to 31 August on the bond according to its coupon rate.)
In finance, the dirty price is the price of a bond including any interest that has accrued since issue of the most recent coupon payment. This is to be compared with the clean price, which is the price of a bond excluding the accrued interest. Dirty Price = Clean Price + Accrued Interest
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.
The price you pay for a bond may be different from its face value, and will change over the life of the bond, depending on factors like the bond’s time to maturity and the interest rate environment.
Here Face value is the face value of the bond, and Clean price is the clean price of the bond (i.e. present value of the bond with accrued interest subtracted). Formula for adjusted current yield [ edit ]
The current yield, interest yield, income yield, flat yield, market yield, mark to market yield or running yield is a financial term used in reference to bonds and other fixed-interest securities such as gilts. It is the ratio of the annual interest payment and the bond's price:
Using the Black model, the spot price in the formula is not simply the market price of the underlying bond, rather it is the forward bond price. This forward price is calculated by first subtracting the present value of the coupons between the valuation date (i.e. today) and the exercise date from today's dirty price , and then forward valuing ...
Yield to put (YTP): same as yield to call, but when the bond holder has the option to sell the bond back to the issuer at a fixed price on specified date. Yield to worst (YTW): when a bond is callable, puttable, exchangeable, or has other features, the yield to worst is the lowest yield of yield to maturity, yield to call, yield to put, and others.