Spread To Worst

AAA

DEFINITION of 'Spread To Worst'

The difference in overall returns between two different classes of securities, or returns from the same class, but different representative securities. The spread to worst measures the difference from the worst performing security to the best, and can be seen as a measure of dispersion of returns within a given market or between markets. The spread to worst can vary significantly depending on different market and economic variables.

Calculated as:

Spread To Worst

INVESTOPEDIA EXPLAINS 'Spread To Worst'

Some of the market and economic variables that affect the spread to worst may include investor confidence, short and long-term interest rates, amount of disposable household income and the age of the investor. A relatively high spread to worst indicates a larger measure of return dispersion versus a relatively lower spread to worst, and can also indicate the potential direction of asset allocation.

For example, a high spread to worst of 50.5% between equities (say an expected return of 55%) and government bonds (say a 4.5% return) would indicate a possible continued short-term focus by investors in the equity markets.

RELATED TERMS
  1. Stock Market

    The market in which shares of publicly held companies are issued ...
  2. Flat Yield Curve

    A yield curve in which there is little difference between short-term ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments ...
  4. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy ...
RELATED FAQS
  1. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  2. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  3. How can I use a regression to see the correlation between prices and interest rates?

    In statistics, regression analysis is a widely used technique to uncover relationships among variables and determine whether ... Read Full Answer >>
  4. What is the difference between shares outstanding and floating stock?

    Shares outstanding and floating stock are different measures of the shares of a particular stock. Shares outstanding is the ... Read Full Answer >>
  5. What is the difference between market risk premium and equity risk premium?

    The only meaningful difference between market-risk premium and equity-risk premium is scope. Both terms refer to the same ... Read Full Answer >>
  6. How do I calculate a modified duration using Matlab?

    The modified duration gauges the sensitivity of the fixed income securities to changes in interest rates. To calculate the ... Read Full Answer >>
Related Articles
  1. Investing Basics

    The Basics Of The Bid-Ask Spread

    The bid-ask spread is essentially a negotiation in progress. To be successful, traders must be willing to take a stand and walk away in the bid-ask process through limit orders.
  2. Options & Futures

    Vertical Bull and Bear Credit Spreads

    This trading strategy is an excellent limited-risk strategy that can be used with equity as well as commodity and futures options.
  3. Options & Futures

    Bond Spreads: A Leading Indicator For Forex

    Here we examine some telling patterns in the relation between countries' interest rates and their currency pairs.
  4. Mutual Funds & ETFs

    ETF Analysis: Energy Select Sector SPDR

    Find out more about the Energy Select Sector SPDR Fund, the top holdings of this exchange-traded fund and the characteristics of the fund.
  5. Investing News

    The Financial Singularity Will Destroy Your Return

    Given the current and future growth of financial technology, many believe algorithms will soon define what drives market outcomes. With a wealth of big data, algorithms would be able to create ...
  6. Investing Basics

    List of the Major Stock Exchanges in the Caribbean

    Though the Caribbean is well-known for its beautiful beaches and vibrant music, it has an emerging capital market that should not be ignored.
  7. Economics

    How An Aging World Can Impact Your Portfolio

    It can be easy for investors to lose sight of longer-term, structural developments in favor of more ephemeral trends and fads in the financial markets.
  8. Trading Systems & Software

    The Fast-Paced World of Libor & Fixed Income Arbitrage

    LIBOR is an essential part of implementing the swap spread arbitrage strategy for fixed income arbitrage. Here is a step-by-step explanation of how it works.
  9. Personal Finance

    Financial Tips For People Who Hate Finance

    For people who hate financial planning, there's usually one big problem – which you can fix. Do it now.
  10. Investing

    Seven Investing Books For Your Summer Reading List

    It’s almost 4th of July, the season of summer reading. Picking up a book during your holiday can be a great opportunity to learn more investing.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!