What is Credit spread in FRM Part 1?

The yield or price premium over a reference curve that compensates for default risk, liquidity, risk premia, and other frictions. A spread is not a pure physical default probability; valuation generally uses risk-neutral inputs.

Credit spread

FRM Part 1 glossary · Valuation And Risk Models

Definition

The yield or price premium over a reference curve that compensates for default risk, liquidity, risk premia, and other frictions.

Credit spread in plain English

A spread is not a pure physical default probability; valuation generally uses risk-neutral inputs.

Learn these first

Monte Carlo simulation
Credit risk

Related FRM Part 1 terms

Backtesting
Basis
Basis point
Binomial option pricing model
Black-Scholes-Merton model
Coherent risk measure
Component VaR
Convexity
Delta
Duration (modified)

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