spread duration

[neilzuo]

what is spread duration?
I know spread,and I know duration
but I cannot understand spread duration
could anyone give me an example to clarify?

 

[mik82]

It’s the same as portfolio duration when there are non-treasuries in the portfolio.

 

[team_alex]

If you know duration, just subtitute “Interest Rate” with “Spread over a treasury of the same maturity”.
Note the LOS only states “Explain the importance of spread duration”. So don’t get too bogged down by it.

 

[mik82]

Yes, it’s the price sensitivity of a non-treasury bond to 100 bps change in spread (over treasuries).

 

[neilzuo]

so if I add back the interest rate on treasury,I would get the whole interest rate of the target bond,right? And this latter interest rate would result in “duration” other than “spread duration”?
Thanks guys,great of you all!

 

[June06]

Nominal spread, OAS, Zero-vol spread…
For a portfolio of Non-Treasury securities, spread duration = portfolio duration.
For a portfolio of both Non-treasury and Treasury securities, spread duration < portfolio duration spread duration of Treasury securities is zero.

 

[S2000magician]

mik82 wrote:It’s the same as portfolio duration when there are non-treasuries in the portfolio.

This is true if there are only non-Treasuries in the portfolio, but not if there is a mix of Treasuries and non-Treasuries.