Can anyone help me by sharing the simplest method they use to calculate Clean and Dirty prices of bonds sold between coupon payment dates?
I am sure I am over complicating it! I assume you can not just use the the Ba II calculator?
Well, i found it straight forward though…
The first thing is to calculate the PV of the Bond, get the number of days between coupon and the number of dats to settlement.
multiply PV by the YTM^(No of days between coupom/No of day to settlement) to get the Dirty Price
Now carry out this: Coupon*(No of days between coupom/No of day to settlement) = Interest component
Clean Price = Dirty Price - Interest Component
I dont think there is a shortcut to finding the clean price from the dirty price.
The calculator will only help you calculate the PV (based on my trial though).
So, knowing the process is a good thing for you…
Cheers.
To clarify, your intial PV is based off of the ‘last coupon paid’?