Answer: I-spread.

## Explanation The correct answer is **A. I-spread**. ### Understanding the Spread Types: 1. **I-spread (Interpolated Spread or ISDA Spread)**: This is the yield spread of a bond over the standard swap rate for the same currency and tenor. It represents the difference between the bond's yield and the swap rate curve. 2. **G-spread (Government Spread)**: This is the yield spread of a bond over a government bond of similar maturity. It measures the credit risk premium relative to the risk-free government benchmark. 3. **Z-spread (Zero-volatility Spread)**: This is the constant spread that must be added to each spot rate on the Treasury spot curve to make the present value of a bond's cash flows equal to its market price. It accounts for the shape of the yield curve. ### Key Distinction: - **I-spread** specifically refers to the spread over the swap rate curve - **G-spread** refers to the spread over government bond yields - **Z-spread** is a more complex measure that accounts for the entire yield curve shape ### Why I-spread is Correct: The question explicitly asks for "a bond's yield spread over the standard swap rate." This is the precise definition of the I-spread. The swap rate serves as a benchmark for corporate funding costs, and the I-spread measures how much additional yield investors demand to hold a bond instead of entering into a swap agreement. ### Additional Context: - Swap rates are often used as benchmarks because they represent the cost of funding for financial institutions - The I-spread is particularly useful for comparing bonds to the swap market, which is often more liquid than the government bond market - This spread helps investors assess the relative value of bonds compared to the swap curve

Author: LeetQuiz .