Credit Spread and Risk-Spread Measures

Credit-spread measures compare a bond’s market price or yield with a reference benchmark. The resulting spread can reflect expected credit loss, uncertainty, liquidity, structure, embedded options, and technical demand. It is not automatically a default probability or guaranteed excess return.

Choose the Measure Before Comparing the Number

Start with Credit Spread for basis-point quotation, benchmark matching, spread components, and rate-versus-spread price effects.

Use the Benchmark Spread Measures branch to select the calculation:

• G-spread for a quick comparison with an interpolated government-curve yield.
• Z-spread for option-free contractual cash flows discounted over the full spot curve.
• OAS for callable or prepayable cash flows modeled across interest-rate paths.

Distressed Credit Requires a Different Lens

Once maturity payment is doubtful, yield to maturity and conventional spread can become economically misleading. Use High-Yield Credit and Workouts for recovery amount, timing, collateral, seniority, restructuring, and workout analysis.

Comparison Checklist

• Exact bond, price source, settlement date, and quote time.
• Benchmark curve, currency, maturity or duration, and interpolation.
• Clean versus dirty price, day count, compounding, and cash-flow assumptions.
• Calls, puts, prepayments, conversions, and model inputs.
• Rating, seniority, security, guarantees, covenants, and recovery.
• Liquidity, bid-ask spread, evaluated pricing, and transaction size.

Two spread values are comparable only after these conventions are aligned. This section is educational only and does not determine fair value or recommend a security.

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