8. Yield Spreads
k. compare, calculate, and interpret yield spread measures.
What does YTM stand for?
What is the G spread?
The spread over or under a government bond rate, also known as the nominal spread.
What is an I spread?
The yield spread over or under the standard swap rate in that currency of the same tenor.
What is a Z spread (zero volatility spread)?
The constant yield spread over the benchmark spot curve such that the present value of the cash flows matches the price of the bond.
What is an option-adjusted spread (OAS)?
Z spread - option value - It is used for bonds with embedded options.