spread risk vs credit risk

CFA Level III
#1

spread risk vs credit risk: any relationship?

#2

Spread risk is the risk of deterioration in credit rating and therefore decrease in value of a bond due to spread rising. For example, if rating goes from BBB to BB the spread will go up. Credit risk is the risk of default on what is owed.

#3

spread risk - risk that spreads widen or narrow leading to an adverse bond price change credit risk - risk that the issue defaults or goes bankrupt I dont think much of a direct relationship

#4

CFASniper Wrote: ------------------------------------------------------- > Spread risk is the risk of deterioration in credit > rating and therefore decrease in value of a bond > due to spread rising. For example, if rating goes > from BBB to BB the spread will go up. > > Credit risk is the risk of default on what is > owed. Widening spreads can happen for a lot of reasons, not just credit rating changes

#5

an increase in credit risk as in the probability of default would cause an increase in spreads and hence adversely effect bond prices. So a relationship definitely exists! (obviously jump risk could cause default with narrow spreads)

#6

credit risk include default risk spread risk downgrade risk lv1 already learn it if you mean credit risk in risk management , it is counterparty can’t pay due payment

#7

Credit spread risk — is it a credit risk or spread risk?

#8

spread

#9

In order to hedge against spreads widening, long credit spread forward or purchase credit spread call.