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Up4
I calculated credit spread using CVA and added this across all nodes of Binomial interest rate tree. But this doesn’t reflect market price of risky bond.
Credit spread is ideally calculated on comparable benchmark bond YTM. But we are adding spread to forward rates of binomial tree here.
So I don’t believe it is credit spread.
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Up3
Credit spread. It contains many components priced in for, e.g. liquidity risk, default risk etc. I found this article quite interesting in detailing the study on it (https://blogs.cfainstitute.org/investor/2012/04/03/components-of-credit-spreads-and-their-importance/)
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