Business and Personal Finance Dictionary

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• CREDIT SPREAD OPTION
  
  Definition: An Option with a payoff that depends on a Credit Spread (q.v.). Example: A one-year European Call (q.v.) on Mexican par bond credit that pays Max[0, 147 bp - (Mexican Brady Bond Yield - Yield on corresponding U.S. Treasury)]. Application: To spread credit risk associated with lending or assume credit risk without lending. Pricing: Risk management: Comment:
  
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