1. What is Dirty Price?

The dirty price of a bond is the price that includes both the clean price and accrued interest. It represents the actual amount that the buyer pays for the bond.

2. How Does the Calculator Work?

The calculator uses the dirty price formula:

Where:

• Clean Price — The quoted price of the bond excluding accrued interest
• Accrued Interest — The interest that has accumulated since the last coupon payment

Explanation: The dirty price accounts for both the principal value of the bond and the interest that has been earned but not yet paid.

3. Importance of Dirty Price Calculation

Details: Accurate dirty price calculation is crucial for bond trading as it determines the actual settlement amount between buyer and seller.

4. Using the Calculator

Tips: Enter clean price and accrued interest in the same currency. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why is it called "dirty" price?
A: It's called dirty because it includes the "unclean" accrued interest component, unlike the clean price which is just the principal value.

Q2: When is dirty price used?
A: Dirty price is used for settlement purposes when bonds are traded between coupon payment dates.

Q3: What's the difference between clean and dirty price?
A: Clean price is the quoted bond price, while dirty price is clean price plus accrued interest.

Q4: How often does accrued interest reset?
A: Accrued interest resets to zero on each coupon payment date.

Q5: Is dirty price higher than clean price?
A: Yes, dirty price is always equal to or higher than clean price since it includes accrued interest.