Swap spread = Reference Rate - Treasury Rate. I couldnt make sense out of the CFAI text explanation作者: lc26mizzou 时间: 2011-7-13 15:26
Reference rate = the rate for an "unsafe" investment (like a corporate bond)
Treasury rate = risk free rate
Reference rate = Treasury Rate + spread
It's really simple. You need to be paid a higher rate if the holder of your money is less safe. That is why there is a positive spread over treasuries. Don't be confused because it's a "swap" spread. The swap market is just a market where you can observe spreads. The spreads can be applied to other investments.作者: farrukhsadiq 时间: 2011-7-13 15:26
