DEFINITION of 'Static Spread'
The constant yield spread which when added to the point on the spot rate Treasury curve where a cash flow from a bond is received will make the price of the bond equal to the present value of its cash flows. In other words, each cash flow is discounted at the appropriate Treasury spot rate plus the static spread. The static spread is also known as a zerovolatility or Zspread.
INVESTOPEDIA EXPLAINS 'Static Spread'
Static or Zspread calculations are frequently used in mortgagebacked securities and other bonds with embedded options valuation. An option adjusted spread calculation, which is frequently used to value bonds with embedded options, is essentially a static spread calculation based on multiple interest rate paths and the prepayment rates associated with each interest rate path.

Spot Rate
The price that is quoted for immediate settlement on a commodity, ... 
Yield To Maturity (YTM)
The rate of return anticipated on a bond if held until the maturity ... 
Spot Rate Treasury Curve
A yield curve constructed using Treasury spot rates rather than ... 
Yield Curve
A line that plots the interest rates, at a set point in time, ... 
ZeroVolatility Spread  Zspread
The constant spread that will make the price of a security equal ... 
Catastrophe Equity Put (CatEPut)
Catastrophe equity puts are used to ensure that insurance companies ...

What is the difference between a zerocoupon bond and a regular bond?
The difference between a zerocoupon bond and a regular bond is that a zerocoupon bond does not pay coupons, or interest ... Read Full Answer >>

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