Hey guys! Could anyone help me get a better understanding of the following: What is the asset swap spread - I'm looking for a trader/PM's definition, the more detail the better. Are there people in Credit Trading (in S&T) who actually trade asset swaps as a product all day? How do you actually think about making money by trading asset swaps, both as a market maker and as a buy-side PM? Thanks!

Asset Swap Rate (ASR) You own a bond with a fixed return of 8.75%. To hedge the interest rate risk, you enters a interest rate swap with a dealer, passes the 8.75% in exchange of a floating LIBOR+ ASR PV of 8.75% fixed rate payments = PV LIBOR + 6% ** the 6% would be your Asset Swap Spread.** This should help to make sense of what an asset-swap spreads mean. Sure, big multi-billion market between HFs/Banks making money as a market-maker.

The Asset Swap Spread - What is it and how do you trade it?

Hey guys! Could anyone help me get a better understanding of the following:

What is the asset swap spread - I'm looking for a trader/PM's definition, the more detail the better.
Are there people in Credit Trading (in S&T) who actually trade asset swaps as a product all day?
How do you actually think about making money by trading asset swaps, both as a market maker and as a buy-side PM?

Thanks!

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3 Comments

Martinghoul

HF

9y

Asset swap is a trade where you buy/sell a cash bond vs paying/recv in swap.
I dunno about credit (I doubt it), but asset swaps are actively traded in rates.
What market? This is an area with a lot of devils in the details. If you want an intro, send me a PM and I can fwd you a paper.

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Authored by: Certified Hedge Fund Professional - Portfolio ManagerCertified Hedge Fund Pro

ForTheDream

ST

9y

Thanks for the help. PM'ed!

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Authored by: Certified Sales & Trading Professional - 3rd+ Year AnalystCertified Sales & Trading Pro

Addax

?

9y

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The Asset Swap Spread - What is it and how do you trade it?

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