Dirty Price
The full price of a bond including accrued interest—the actual amount a buyer pays at settlement.
What is Dirty Price?
The dirty price of a bond (also called the full price or invoice price) is the actual price paid by a buyer at settlement, which equals the clean price plus the accrued interest accumulated since the last coupon payment date. While bonds are quoted on trading screens at their clean price, the dirty price is what changes hands in a transaction. Accrued interest compensates the seller for the portion of the next coupon payment they earned by holding the bond since the last coupon date. After a coupon is paid, accrued interest resets to zero and begins accumulating again, causing the dirty price to gradually rise between coupon dates and fall back to approximately the clean price immediately after each coupon payment.
Example
A bond with a 6% annual coupon (paid semiannually) and face value of $1,000 has a clean price of $1,020. Purchased 60 days after the last coupon payment (in a 183-day period): Accrued interest = $1,000 × 6% / 2 × (60/183) = $9.84. Dirty price = $1,020 + $9.84 = $1,029.84. The buyer pays $1,029.84 at settlement; the seller keeps the $9.84 accrued interest for the period they held the bond.