DxS

Question 1

What is Duration times spread?

Answer 1

Duration Times Spread (DTSSM) is a new measure of spread exposure for corporate bond portfolios. It is based on a detailed analysis of credit spread behavior.

Question 2

And understanding DTS is intuitive: A bond or portfolio with a DTS twice that of another bond or portfolio means…

Answer 2

it will be twice as impacted if credit spreads widen.

Question 3

What does DTs allow investors to estimate?

Answer 3

DTS allows investors to estimate the negative percent return of any bond if its spread were to double from the current level, all other factors staying the same.

Question 4

What is the core idea behind duration times spread?

Answer 4

The core idea behind DTS is the empirical observation
that the volatility of a corporate bond is proportional to
the product of its spread duration and its spread, with
the relationship holding over a wide range of market conditions.