Asset Swap Spread (ASW)
The spread an investor receives over the floating rate in an asset swap, reflecting the bond's credit risk relative to the swap market.
The Asset Swap Spread represents the credit component of a bond's yield in swap terms. In an asset swap, an investor buys a fixed-rate bond and enters a swap to receive floating (e.g., SOFR) plus a spread. The ASW captures the difference between the bond's fixed cash flows and the par swap rate, adjusted for any premium or discount to par. Formula (simplified): ASW ≈ (Coupon − Swap Rate) + (100 − Clean Price) × freq / (TTM × freq) in percentage, converted to bp. For par bonds, ASW ≈ I-Spread. For discount bonds, ASW > I-Spread (the price discount adds extra spread). For premium bonds, ASW < I-Spread. Asset swaps are fundamental to credit relative value trading — they strip out interest rate risk, leaving pure credit exposure priced in floating-rate terms.
I-Spread (Interpolated Spread)
The difference between a bond's yield and the interpolated swap rate at the same maturity.
G-Spread (Government Spread)
Yield spread of a bond over the interpolated government benchmark curve at matching maturity.
Z-Spread (Zero-Volatility Spread)
The constant spread added to every point on the zero curve to discount all cash flows to the bond's market price.
Option-Adjusted Spread (OAS)
Credit spread after removing the value of embedded options — computed via BDT binomial tree.
Current Yield
Annual coupon income divided by the bond's clean price.
Running Yield
Annual coupon income divided by the bond's dirty price (clean price plus accrued interest).