C
curiousactuary
Member
My understanding of credit spread is that it is the extra yield on backing assets (say corporate bonds) that is in excess of risk-free rates.
The SII matching adjustment = credit spread on matching assets - fundamental spread
The SII volatility adjustment = credit spread on a representative portfolio of assets.
In each case is the credit spread composed of a a liquidity risk premium + a default risk premium? Are there any other components to the credit spread?
The SII matching adjustment = credit spread on matching assets - fundamental spread
The SII volatility adjustment = credit spread on a representative portfolio of assets.
In each case is the credit spread composed of a a liquidity risk premium + a default risk premium? Are there any other components to the credit spread?