Z-Spread
Also called: zero-volatility spread, z spread
The Z-spread is the constant amount added to every point on the risk-free curve that makes a bond's discounted cash flows equal its market price. It improves on a simple yield spread by respecting the shape of the curve rather than comparing against a single maturity. For bonds with embedded options it's still incomplete, which is where option-adjusted spread takes over by stripping out the option's value first.
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