Clean Price
The quoted price of a bond that excludes accrued interest, representing only the present value of future cash flows.
What is Clean Price?
The clean price of a bond is the quoted market price that excludes accrued interest—the interest that has accumulated since the last coupon payment date but has not yet been paid to the bondholder. Clean prices are the standard way bonds are quoted in most markets (including the U.S. and Europe) because they allow investors to compare bond prices meaningfully without the noise of varying accrued interest at different points in the coupon cycle. When a bond is actually purchased, the buyer pays the dirty price (also called the full price or invoice price), which is the clean price plus accrued interest. The dirty price is what changes hands at settlement; the clean price is what is displayed on trading screens.
Example
A 5% coupon bond with face value of $1,000 has a clean price of $985. It is being purchased 45 days into a 182-day coupon period. Accrued interest = $1,000 × 5% × (45/365) = $6.16. The investor pays the dirty price: $985 + $6.16 = $991.16. The $6.16 represents the portion of the next coupon that 'belongs' to the seller for holding the bond during that period.