Spread duration

An investor s corporate bond portfolio has an identical duration to a benchmark portfolio of government bonds, and an OAS of 50 basis points. Assume that the portfolio has a spread duration of 5. During a 12-month holding period, the excess income of the portfolio compared to government bonds is 0.25%. How much can the OAS widen before the corporate bond portfolio begins to underperform the government portfolio ... 

Spread duration Measuring the price sensitivity to change of quoted margin, maintaining a fixed reference rate. 

Index duration is usually equal to the time until the next reset date, whereas spread duration is equal to a modified duration of a bond paying fixed coupon, with same coupon payments and time to maturity. Therefore, conventionally floaters have lower index duration and higher spread duration. 

The nominal spread is the traditional spread measnre. The nominal spread is simply the difference between the yield on a nongovernment issue and the yield on a comparable maturity government. When the spread is taken to be the nominal spread, spread duration indicates the approximate percentage change in price for a 100 basis point change in the nominal spread holding the government yield constant. 

Finally, the option-adjusted spread (OAS) is the constant spread that, when added to all the rates on the interest rate tree, will make the theoretical value equal to the market price. Spread duration based on OAS can be interpreted as the approximate percentage change in price of a nongovernment for a 100 basis point change in the OAS, holding the government rate constant. 

A sensible question arises How do you know whether a spread duration for a fixed-rate bond is a spread based on the nominal spread, zero-volatility spread, or the OAS The simple answer is you do not know You must ask the broker/dealer or vendor of the analytical system. To add further to the confusion surrounding spread duration, consider the term OAS duration that is referred to by some market participants. What does it mean On the one hand, it could mean simply the spread duration that we just described. On the other hand, many market participants use the term OAS duration interchangeably with the term effective duration. Once again, the only way to know what OAS is measuring is to ask the broker/dealer or vendor. 

The total mass of SO3 vapor evolved in the three regimes (spreading duration, duration after spreading ceases, and total release duration)... 

The spreading duration (which can be different to the spill duration tsi)... 

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