Serving the Quantitative Finance Community
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- mapleleafs
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Current Yield Confusion
Should we use clean price as a denominator instead of dirty price? My professor insisted that we should use dirty price.My thought:In considering the amount invested, the clean price should be used rather than the dirty price; the accrued interest included in the dirty price paid up-front can be considered as given back to investor when he/she recieves his/her first coupon payment (assuming no default and missing payment scenario).tks in advance.
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- johnself11
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Current Yield Confusion
by current yield do you mean the "Yield To Maturity"? sounds like you are trying to calculate some sort of risk parameter such as modified duration......
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- mapleleafs
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Current Yield Confusion
Current Yield means coupon divided by bond market price.My Prof. said bond market price should be dirty price instead of clean price. Is that correct?I really don't think we should use dirty price
Current Yield Confusion
to calculate current yield it's market practive to use the dirty price, since this is the amount you pay for the bond