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 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.
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
frequency - 2 semi-annual
Day Convention / Basis
Coupon Days Accrued
Number of Days in Period
Quoted Dirty 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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