medium · Debt Capital Markets pricing-yields-curve
Which of the following best defines the Z-spread of a corporate bond?
- The difference between the bond's redemption yield to maturity and the yield of a single on-the-run government benchmark.
- The spread quoted over the benchmark interest-rate swap rate observed at the bond's interpolated maturity on the par swap curve.
- The residual spread that remains after the present value of any embedded call or put option is stripped out of the bond's market price.
- The constant spread added to the entire benchmark spot curve that equates the present value of cash flows to the market price.
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