Spread Swap

How does the spread swap compares the relative attractiveness of fixed and floating rate bonds? Tks

never heard it

I mean swap spread

I have the same question. “The swaps framework allows managers (as well as issuers) to more easily compare securities across fixed-rate and floating-rate markets.” How?

I guess there was something about this on Level II. Swap spread = Fixed Rate - Floating Rate on a swap for a particular time period (maturity). Both are based on LIBOR/EURIBOR kind of rates. So instead of depending on local interest rates and the like - the Swap spread is a more universal kind of standard - and allows to compare a fixed to a floating rate.

swap market is way more fluid,liquid,active than the bond markets which allows for relative comarison easier

and swap can convert them to both fixed or floating to compare.

Swap spread of a corporate bond is its spread over the prevalent fixed rate on interest rate swaps of similar maturity. It is believed to be a good indicator of credit risk or even liquidity premium because it is market driven and easy to obtain and compare. It is more popular in the European markets but gaining popularity in the US as well.

deriv108 Wrote: ------------------------------------------------------- > I have the same question. “The swaps framework > allows managers (as well as issuers) to more > easily compare securities across fixed-rate and > floating-rate markets.” How? This one came from Schweser Practice exam right? Should we just ignore Schweser altogether?

It’s directly from the curriculum… thanks to hellscream, sniper and everyone.