Serving the Quantitative Finance Community
daily return
Hi,The question might be simple but I didn't find any reference about it on Google:if I want to compute the bond daily return should it be: [(Accrued interest + clean price (day t) - clean price(day t-1))]/clean price (day t-1)?mainly I am not sure whether I should divide by clean or dirty price . I feel also the numerator is wrong because at the day of the coupon payment the accrued interest is zero but the investor has received a coupon payment. Can anyone help in this regard?many thanks
daily return
You should put accrued interest in the denominator as well
-
- frenchyWill
- Posts: 0
- Joined:
daily return
Either you use clean prices or dirty prices, but you can't mix it.So the real question is : should I use clean prices or dirty prices ? My guess would be : it depends on what you want to study. If you want to study the risk factors underlying your bond prices, then you should use clean prices.