wilmott.com

What does "makewhole maturity" mean?

what does "makewhole spread" mean?

QuoteOriginally posted by: yoyogiwhat does "makewhole spread" mean?I think Punter answered your question but I'll give it a go in more explicit terms. The make whole spread is the amount added to an index that is used to pv back the future coupon payments in the event of a call of debt. ie) I have a bond that is 6% coupon, semi annually for the next 5 years. The make whole provision is Treasuries + 50bps. I am entitled to 10 payments of 3% each. Those 6 payments and the principal are discounted back at 3.90 (5 year treasuries) + 50bps. or 4.40. This should give you a dollar price of roughly 107. How do you suppose this relates to asset swaps?? There is some callability which can make a bond less desireable and impact the spread. The OAS or option adjusted spread is one that incorporates the value of this prepayment option to adjust the spread on the bond downward. This may be one reason that a callabale fixed rate bond does not price out like an equivalent floating rate bond.

"makewhole spread" is a common feature of callable convertible asset swaps. Broadly speaking it is the amount that must be paid by the holder of a call option upon exercise.servus

QuoteOriginally posted by: hojdard"makewhole spread" is a common feature of callable convertible asset swaps. Broadly speaking it is the amount that must be paid by the holder of a call option upon exercise.servusGotcha. So is this feature added to give a non callable bond some kind of optionality??

not really. Think about it as a fee or a penalty that must be paid by a bank/HF/broker who cancels the asset swap. This fee partly compensates asset swap holder for consequently missed running spread (which is obviously higher than the current market spread).