Spread

1. A term used to refer to the amount added or subtracted from an interest rate index to compute the interest charged on a loan. An interest rate of 3-month LIBOR plus 2% would have a positive spread of 200 basis points.
2. Sometimes used to refer to the underwriting discount kept by an investment bank when it sells securities. In an offering of junk bonds, an underwriter might purchase securities at 97% of their face amount (a discount of 3%) and sell them for face. In such a case the underwriting spread would be 3%.

Copyright (c) 2002-2019 William H. Widen. All rights reserved.  ^ Page Top ^