Clean Price
Definition
Clean price is a bond’s quoted price excluding accrued interest. It’s the smooth, day-to-day price you see on screens; the cash you actually pay is the dirty (full) price.
Key Takeaways
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What you see in quotes = clean; what you pay/receive at settlement = dirty.
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Clean = Dirty − Accrued Interest.
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Clean prices look smoother because accrued interest builds between coupon dates.
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Current yield uses clean; YTM should be computed from dirty (cash price).
Nigeria Example (illustrative)
Face = ₦1,000,000; quoted clean = 102.50% → ₦1,025,000.
Accrued interest (since last coupon) = ₦16,071.
Dirty = ₦1,025,000 + ₦16,071 = ₦1,041,071 (cash paid).
Common Pitfalls
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Forgetting that settlement uses dirty, not clean.
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Miscomputing accrued (wrong day-count or period).
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Comparing yields without aligning price basis (clean vs dirty).
Mini-FAQ
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Why quote clean? To avoid a mechanical up-drift from accrued interest.
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When do clean and dirty match? Right after a coupon is paid (accrued resets to zero).
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Which price for YTM? Use dirty.
Related Terms
Dirty Price · Accrued Interest · Coupon · Yield to Maturity (YTM) · Duration
