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Portfolio Credit Spread Risk
Jan 1, 2010
Spread risk statistics should enable comparisons not only between securities issued by the same firm, but also across different issuers. We present a flexible risk management framework for measuring credit spread risk at the portfolio level. Spread risk factors, such as bond spreads and CDS data, can be drawn directly from the bond and credit markets, and indirectly through prices and implied volatilities from the equity markets. In order to produce a coherent spread risk measure across a portfolio, we outline how spreads can be translated form one market to another.
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