Zero-Volatility Spread - Z-spread

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Dictionary Says

Definition of 'Zero-Volatility Spread - Z-spread'


The constant spread that will make the price of a security equal to the present value of its cash flows when added to the yield at each point on the spot rate Treasury curve where a cash flow is received . In other words, each cash flow is discounted at the appropriate Treasury spot rate plus the Z-spread.


The Z-spread is also known as a "static spread".

Investopedia Says

Investopedia explains 'Zero-Volatility Spread - Z-spread'


A Z-spread calculation is different than a nominal spread calculation. A nominal spread calculation uses one point on the Treasury yield curve (not the spot rate Treasury yield curve) to determine the spread at a single point that will equal the present value of the security's cash flows to its price.

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