• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Treasury bond futures

E

Edwin

Member
Suppose we have not yet received any coupon from a bond. Say we are to receive the coupon in 3 days. If the current Bond price is 120, when calculating the Spot price, do we add the accrued interest?

My hypothesis was we do not, but I would like to confirm if I'm right.
 
The price quoted for a UK bond in the Financial Times or on a website is an artificial price called the "clean" price. The actual price you would pay or receive when trading the bond is the "dirty" price, which is the clean price adjusted for the proportion of the next coupon that has accrued.

In formulae such as the one for calculating the futures price, you need to use the dirty price, ie the "true" price.
 
The price quoted for a UK bond in the Financial Times or on a website is an artificial price called the "clean" price. The actual price you would pay or receive when trading the bond is the "dirty" price, which is the clean price adjusted for the proportion of the next coupon that has accrued.

In formulae such as the one for calculating the futures price, you need to use the dirty price, ie the "true" price.

I think it's clear, does this mean we accrue interest from the past in the case of a past coupon and from the future in the case of an outstanding coupon?
 
Back
Top