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In finance, the yield spread or credit spread is the difference between the quoted rates of return on two different investments, usually of different credit qualities but similar maturities. It is often an indication of the risk premium for one investment product over another. The phrase is a compound of yield and spread .
10 year minus 2 year treasury yield. In finance, the yield curve is a graph which depicts how the yields on debt instruments – such as bonds – vary as a function of their years remaining to maturity. [1] [2] Typically, the graph's horizontal or x-axis is a time line of months or years remaining to maturity, with the shortest maturity on the ...
The Z-spread, ZSPRD, zero- volatility spread, or yield curve spread of a bond is the parallel shift or spread over the zero-coupon Treasury yield curve required for discounting a predetermined cash flow schedule to arrive at its present market price. The Z-spread is also widely used in the credit default swap (CDS) market as a measure of credit ...
For example, if a 30-year mortgage denominated in US dollars has a gross redemption yield of 5% per annum and 30 year US Treasury Bonds have a gross redemption yield of 3% per annum (referred to as the risk free yield), the credit spread is 2% per annum (sometimes quoted as 200 basis points). The credit spread reflects the risk of default.
Finance. In finance, a credit spread, or net credit spread is an options strategy that involves a purchase of one option and a sale of another option in the same class and expiration but different strike prices. It is designed to make a profit when the spreads between the two options narrows . Investors receive a net credit for entering the ...
I-spread. The Interpolated Spread, I-spread or ISPRD of a bond is the difference between its yield to maturity and the linearly interpolated yield for the same maturity on an appropriate reference yield curve. The reference curve may refer to government debt securities or interest rate swaps or other benchmark instruments, and should always be ...
The lower the credit rating, the higher the spread, thus reflecting the extra yield premium demanded for greater risk. Using this model we can describe returns of, say, an A-rated security in terms of movements in the AAA curve, plus movements (tightening or widening) in the credit spread.
Spread trade. In finance, a spread trade (also known as relative value trade) is the simultaneous purchase of one security and sale of a related security, called legs, as a unit. Spread trades are usually executed with options or futures contracts as the legs, but other securities are sometimes used. They are executed to yield an overall net ...