Z-spread

CFA Level I Glossary

The Z-spread is the constant spread added to each benchmark spot rate so the present value of a bond’s cash flows equals its market price. It is a full-curve credit and liquidity spread measure for option-free bonds. For bonds with embedded options, OAS is more appropriate for comparison. Confusing Z-spread with a simple G-spread to a single benchmark yield ignores the spot curve shape.

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