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credit spread |
Also found in: Wikipedia | 0.01 sec. |
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Credit Spread 1. The spread between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating. 2. An options strategy where a high premium option is sold and a low premium option is bought on the same underlying security. Notes: 1. For instance, the difference between yields on treasuries and those on single A-rated industrial bonds. A company must offer a higher return on their bonds because their credit is worse than the government's.2. An example would be buying a Jan 50 call on ABC for $2, and writing a Jan 45 call on ABC for $5. The net amount received (credit) is $3. The investor will profit if the spread narrows. Can also be called "credit spread option" or "credit risk option". Credit spread Applies to derivative products. Difference in the value of two options, when the value of the one sold exceeds the value of the one bought. One sells a "credit spread." Antithesis of a debit spread Related: Quality spread.
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| separately, marveled at the way credit spreads failed to widen out as the losses were quickly absorbed. And, as credit spreads widen, they impact equities, fixed income, and most hedge fund strategies. Due to the mixing, the increased size of transactions and the maturing of the pooled funding product, weighted average credit spreads for insurance companies have dropped by approximately 50 basis points (0. |
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