Credit Spread Duration
Credit Spread duration is similar to ordinary duration, but, instead of telling you how sensitive a bond’s price is to changes in the risk-free rate, credit spread duration tells you how sensitive a bond’s price is to changes in credit spreads.
We can measure the credit spread duration of any instrument who’s price is a function of credit spreads, including credit default swaps.
Depending on the instrument, the credit spread duration and ordinary duration can be similar or very different:
Credit Default Swap and Floating Rate Bonds typically have credit spread duration, but very little ordinary duration;
Risk-Free Government Bonds should have no credit spread duration, but do have ordinary duration;
for Fixed-Rate Corporate Bonds the credit spread duration and ordinary duration are usually equal.
Credit spread 01 or CS01 is another popular measure of credit sensitivity.