Bonds

Bonds - The price of a bond (part 1)

Level: Beginner / Length: 7 minutes

This module is part one of two on the topic of the price of bonds. The course is the beginning of our exploration of bond trading in the secondary market.


The bond price you see on a trading screen is a percentage price. Why is that?

What exactly is the ‘accrued coupon’ on a bond?


This ‘secondary market’ is the place in which all bonds trade once the initial primary market issue has taken place. It is in this secondary market that the price of a bond is important for bond investors. We need to understand the quoted price for a bond known as the clean price. And in this first topic we begin by showing you how to calculate the cash equivalent of the clean price of the bond. We’ll also explain why the investor pays the ‘dirty price’ for a bond rather than just the clean traded price. 

We’ll look at:

  • The price of a bond is a percentage. What does this mean?
  • Trading the ‘clean’ price of a bond
  • Coupon accruals
  • The invoice or ‘dirty price’ of a bond

IMPORTANT INFORMATION

Please note that Saxo Academy is property of Saxo Bank A/S. The materials published on Saxo Academy should not be considered as financial, investment, tax, trading or other advice, or recommendation to invest or disinvest in a particular manner. SCML assumes no liability for any losses resulting from trading in accordance with a perceived recommendation or reliance on Saxo Academy materials. Following or replicating other traders involves risk. Past performance of a trader is not indicative of future results.