Dirty Price

The dirty price (also called the full price or invoice price) is the actual amount a bond buyer pays, calculated as the clean price (quoted market price) plus accrued interest since the last coupon payment date. While bonds are quoted using clean prices to provide consistent comparisons, transactions settle at the dirty price because the seller is entitled to interest earned during their holding period. For example, if a bond's clean price is $1,020 and 60 days of interest have accrued at $0.50/day, the dirty price is $1,050. The dirty price exhibits a "sawtooth" pattern over time: it gradually rises as interest accrues between coupon dates, then drops sharply on the coupon payment date when accrued interest resets to zero. Understanding the distinction between clean and dirty price is essential for bond traders, portfolio managers, and anyone calculating the true cost of a bond purchase or the proceeds from a bond sale.