Zero-Volatility Spread - Z-spread

AAA

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 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.

RELATED TERMS
  1. Spot Rate

    The price that is quoted for immediate settlement on a commodity, ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, ...
  3. Spot Price

    The current price at which a particular security can be bought ...
  4. Spread

    1. The difference between the bid and the ask price of a security ...
  5. Spot Rate Treasury Curve

    A yield curve constructed using Treasury spot rates rather than ...
  6. Treasury Direct

    The online market where investors can purchase federal government ...
Related Articles
  1. The Impact Of An Inverted Yield Curve
    Bonds & Fixed Income

    The Impact Of An Inverted Yield Curve

  2. Get A Short-Term Advantage In The Money ...
    Personal Finance

    Get A Short-Term Advantage In The Money ...

  3. What You Need To Know About Preferred ...
    Trading Strategies

    What You Need To Know About Preferred ...

  4. Understanding The Bond Behemoth That ...
    Mutual Funds & ETFs

    Understanding The Bond Behemoth That ...

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center