Price Between Coupon Dates

You can calculate the price of a bond for dates between coupon dates by
1) Using the PRICE function.
2) Using the YIELD function - uses clean price as an argument


What is the Clean Price ?

Also known as the Flat Price, Quoted Price
This is the price excluding any accrued income
Traders usually quote clean prices

What is the Accrued Interest ?

Accrued Interest is the interest that adds up (ie accrues) each day between coupon payments.
The accrued interest represents the unpaid part of the coupon since the last interest payment.
In the US and Canadian bond markets the accrued interest is added to the quoted price of the bond so it represents the total amount you will actually pay.
In most European markets the accrued interest is not added to the quoted price of the bond.

questions - how many days in a year
questions - how many days in a month

Accrued interest is reinvested at exactly the same rate throughout the life of the whole bond.
We obviously need a way of calculating the yield on all the days in between the coupon dates as well.
When an investor sells a bond in between coupon dates this investor receives a proportion of the next coupon payment.
This amount is known as the accrued income.
This is the accrued income on the next coupon payment.

If you buy or sell a bond it matures you will most likely catch the bond between coupon payments.
If you are selling you are entitled to the price of the bond plus the accrued interest that the bond has earned up to that point.
The buyer compensates you for this by adding the accrued interest to the current price.

This is the amount of the coupon payment that the holder of the bond has earned since the last coupon payment

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SS - equation
Include only one of the two bracketing dates
If this is the first coupon, use the dates date instead of the previous coupon date.

SS - Equation

coupon days accrued - COUPDAYBS
number of days in period - COUPDAYS

The interest earned between coupons is simple interest and not compounded

What is the Dirty Price ?

Also known as the Street Price, Full Price.
Dirty Price = Clean Price + Accrued
bond price including any accrued income.
Bond market convention is to always quote the clean price.
This is the price paid by the buyer to the seller.
This is the price without any accrued
When investors buy a bond, they pay the dirty price (or gross price)
The dirty price is the clean price plus the accrued.

Example 1

A corporate bond has a 10% coupon and a maturity date of 1 March 2020.
It has a current dirty price if £118.78
The settlement date is 17 July 2014
SS - excel
settlement date
maturity date
frequency - 2 semi-annual
Day Convention / Basis
Coupon Rate
Coupon Days Accrued
Number of Days in Period
Quoted Dirty Price
Accrued Interest
Clean Price
Yield to Maturity (Yield)

Ex Dividend Period

This is the period between when a coupon is announced and when it is actually paid
If a bond trades in this period, it is the seller who receives the next coupon.

Cum Dividend Period

This is the period between the coupon payment date and the next ex-dividend date.


Investor 1 buys a bond from Investor 2, 10 days before a coupon is paid
Investor 1 will receive the entire coupon
Investor 1 must pay Investor 2 most of the accrued interest.


There is an inverse relationship between price and yield. The higher the yield, the lower the price.
Bloomberg screen - DCX

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