medium · Debt Capital Markets bond-instruments-structures
In the context of the LIBOR-to-SOFR transition, what is the 'Credit Spread Adjustment' (CAS)?
- A one-time fee a bank charges to convert an existing loan from LIBOR to SOFR.
- A fixed addition to SOFR to account for the lack of bank credit risk inherent in LIBOR.
- The difference between the daily SOFR fixing and the prevailing overnight index swap rate.
- A rating-driven adjustment applied to an issuer's spread based on its balance-sheet leverage.
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