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What is a swap spread? The difference in yield between the fixed rate on a swap...

  1. What is a swap spread?
  1. The difference in yield between the fixed rate on a swap and the yield of an equal maturity US Treasury.
  2. The difference in yield on LIBOR and the fixed rate on a swap.
  3. The difference in yield on SOFR and LIBOR.
  4. The difference in yield between a “BBB” rated corporate bond and the payments in a CDS contract on that corporation.
  5. The difference in yield between LIBOR and 90-day T-Bills.

Solutions

Expert Solution

Correct option is "A" - The difference in yield between the fixed rate on a swap and the yield of an equal maturity US Treasury.

Swap spread is a difference between swap rate of fixed leg and yield on government security with same maturity

For example :

A 15 year Swap has a fixed rate = 4% while A 15 year treasury note has a interest ate of 3%

so Swap spread = 4 -3 = 1$

jeff jeffy answered 2 years ago
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