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I would like to understand what is credit spread basis currency ajustment.

credit spread implied by a usd bond won't be the same as one implied by a chf bond, isn't it ?

Do you have any elements (litterature, explanations or argument) to help me have a real understanding about it ?

Many thanks,

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2 Answers 2

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Regarding part of your question about the reason why credit spread is diffirent between USD debt and CHF debt on the same obligor. It is because the probability of default and recovery aren't the same. I have explained this by 2 examples in the below question :

https://quant.stackexchange.com/a/40876/30239

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  • $\begingroup$ Thanks a lot for your link and explanations. I would like to know how to calculate a hypothetical USD spread considering a CHF spread implied by a corp CHF bond. My reasoning would be to say: same spread + a CCY component. Is it absurd ? How to estimate this component (as a mean of the difference of USD/CHF bond-spreads for same companies ?) ? Thanks $\endgroup$
    – user25844
    Jul 25, 2018 at 9:57
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I think you may be talking about the currency basis adjustment. My understanding is that this reflects both the relative liquidity and credit risk of the markets. So, in summary it represents demand and supply and credit. There is a reasonable amount of literature available on the subject.

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