z-spread q

[whodey]

z-spread is a measure off:
a) all points on the spot curve
b) all points on the treasury yield curve

This confuses me because isn't the z-spread usually a measure of Treasury spot yeild curve? b says nothing about spot yields, but a says nothing about treasuries.

 

[TheChad]

a...

The Treasury Rate Curve is the curve you get from interpolating the treasury rates that you know.

If the yield curve is not horizontal, then the spot rates will differ more and more with maturity.

 

[Char-Lee]

a) the spot curve is made of treasuries

 

[FisherSU]

i would pick a, since z is a spread over entire treasury spot rate curve, but the question is badly worded in my opinion.

 

[mcf]

"The zero-volatility spread is a measure of the spread that the investor would realize over the entire Treasury spot rate curve if the bond is held to maturity."

That is the answer from the CFA on this question. Helpful, no?

So I guess A

 

[dcbreber]

nominal rate is off the yield curve,
z spread and oas off the spot curve. i think there is a table with this in the book

 

[daj224]

Z spread = OAS + option cost