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The Z-spread of a bond is the number of basis points (bp, or 0.01%) that one needs to add to the Treasury yield curve (or technically to Treasury forward rates) so that the Net present value of the bond cash flows (using the adjusted yield curve) equals the market price of the bond (including accrued interest). The spread is calculated iteratively.
Yield spread can also be an indicator of profitability for a lender providing a loan to an individual borrower. For consumer loans, particularly home mortgages , an important yield spread is the difference between the interest rate actually paid by the borrower on a particular loan and the (lower) interest rate that the borrower's credit would ...
In finance, a spread trade (also known as a 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.
Yield spread – difference between the quoted rates of return on two different investments; I-spread — difference between a bond yield and an interpolation from the Treasury yield curve; Z-spread — parallel spread of a bond yield over the zero-volatility Treasury yield curve
For an MBS, the word "option" in option-adjusted spread relates primarily to the right of property owners, whose mortgages back the security, to prepay the mortgage amount. Since mortgage borrowers will tend to exercise this right when it is favourable for them and unfavourable for the bond-holder, buying an MBS implicitly involves selling an ...
To test the Vortex Indicator against Welles Wilder's Directional Movement Indicator (DMI), a portfolio of 38 of the most actively traded, full sized, futures contracts was created. These 38 futures included a number of index and financial futures, currencies, metals, energy futures and commodities like grains, oils and foods.
Spread, the difference in price between related securities, as in: Bid–offer spread, between the buying and selling price of a commodity and/or security; Credit spread (bond), on bonds; Option-adjusted spread, on mortgage backed securities where the borrower has the right to repay in full; Options spread, building blocks of option trading ...
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