DEFINITION of 'Quality Spread Differential  QSD'
In an interest rate swap, the difference between the interest rates of debt obligations offered by two parties of different creditworthiness that engage in the swap. A swap transaction is considered beneficial to both parties only when the QSD is positive.
INVESTOPEDIA EXPLAINS 'Quality Spread Differential  QSD'
For example, suppose ABC Corp can borrow debt at a fixed rate of 10.75% or at a floating rate of LIBOR. And let's say that XYZ Corp. can borrow debt at a fixed rate of 10% or at a floating rate of LIBOR 0.25%. The fixed rate differential would be 0.75% and the floating rate differential would be 0.25%. The QSD would be 0.5%.
Since the QSD is positive, both companies would benefit from entering into a swap transaction.
RELATED TERMS

LIBOR
LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate ... 
Credit Rating
An assessment of the credit worthiness of a borrower in general ... 
Swap Dealer
An individual who acts as the counterparty in a swap agreement ... 
Interest Rate Swap
An agreement between two parties (known as counterparties) where ... 
Derivative
A security whose price is dependent upon or derived from one ... 
Credit Default Swap  CDS
A swap designed to transfer the credit exposure of fixed income ...
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