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. Spread

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

    A yield curve constructed using Treasury spot rates rather than ...
  4. Yield Curve

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

    The current price at which a particular security can be bought ...
  6. Next Generation Fixed Income (NGFI) ...

    A Next Generation Fixed Income (NGFI) manager is a fixed income ...
Related Articles
  1. Bonds & Fixed Income

    The Impact Of An Inverted Yield Curve

    Find out what happens when short-term interest rates exceed long-term rates.
  2. Personal Finance

    Get A Short-Term Advantage In The Money Market

    This investment vehicle is often the perfect stop-gap measure for growing your money.
  3. Mutual Funds & ETFs

    Preferred Stock ETFs: Are They Right for You?

    Considering preferred stock ETFs? Here's a look at their pros and cons.
  4. Mutual Funds & ETFs

    PIMCO vs. BlackRock: Weighing Mega Fund Managers

    A look at the world's biggest bond manager and the world's largest asset manager.
  5. Mutual Funds & ETFs

    The ABCs of Mortgage-Backed Securities ETFs

    ETFs focused on mortgage-backed securities, or MBS, offer an opportunity to further diversify the fixed-income portion of your portfolio.
  6. Economics

    What Would Happen If Interest Rates Rise?

    This time around, while U.S. long-term yields have rebounded from their January lows, rates have generally been lower than where they ended 2014.
  7. Investing

    Strategies To Position Your Bond Portfolio

    Fixed income investors may not be able to see them all right now, but important trends are stirring on the investment horizon.
  8. Savings

    How To Make Money With Airbnb: Risks & Rewards

    Airbnb lets you turn your home or spare room into extra cash. Here's how to make money and protect yourself from the risks.
  9. Mutual Funds & ETFs

    Consider This High-Yield ETF's Risks and Rewards

    Finding quality high-yield opportunities isn’t easy, but the YieldShares High Income ETF (YYY) has potential.
  10. Investing

    What are Fixed-Income Securities?

    For a fixed-income security, the periodic return on the investment is the same throughout the life of the security. Principal is returned at the time of maturity. The payment can be in the form ...

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center