Clean price is the price of a coupon bond not including accrued interest payments. That is, it doesn’t include the accrued interest between coupon payments. The clean price is typically the quoted price on the national news sites.
Dirty price is the price of a bond that includes accrued interest between coupon payments.
Difference between Clean Price and Dirty Price –
- Firstly, the fundamental difference between the clean price and the dirty price is the fact that the clean price does not represent any accumulated interest. Dirty price, on the other hand, includes accumulated interest in the bond price.
- Clean Price is always less than or equal to the dirty price. Clean price can never be higher than the dirty price unless there’s a negative interest rate applied.
- Clean price just informs the investor about the face value of the bond. Other interest calculations need to be made by the investor himself. Dirty price shows a lump sum value of the bond at a certain point in time.
- Clean price stays the same across the life of the bond. On the other hand, dirty price tends to increase till the point where coupon payment is due. After the coupon payment is due, the price restores back to the clean price.
- Clean Price is mainly used in the US. Dirty price is used in the UK.