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  • March 22, 2021
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Credit Quanto Spread

The quanto spread that relates to a credit derivative, particularly credit default swaps (CDSs), in which case it is known as a CDS quanto spread. It also relates to instruments associated with credit risk (default risk) such as bonds and other fixed-income securities (in which case, there are bond quanto spreads and bond redenomination spreads).

The quanto spread reflects the correlation between the hazard rate (associated with the credit entity) and an exchange rate (FX rate). It is affected by the change in the FX rate upon default.


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