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- blackscholes
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Credit Spread and Excess Returns (Matched to Maturity or Duration)
If I have an index of bonds with an average maturity of 10 years and I want to calculate the credit spread and excess returns against some comparable benchmark, should I use the 10 year Treasury yield or a portfolio of basket duration matched Treasuries?Some literature take the yield and subtract the risk-free rate with the same maturity. I know for individual bonds, this is how it's done.
Credit Spread and Excess Returns (Matched to Maturity or Duration)
Intuitively, risk free rate with the same maturity (10 y treasury) as every bond within your index should be compared to it in order to get a measure of your default risk. To be confirmed.
Credit Spread and Excess Returns (Matched to Maturity or Duration)
use a benchmark default free index.
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