2722 Credit Spread options These provide a payoff dependent on movements in a particular credit spread There is usually no payoff in the event of a default on the reference asset Payoff may be defined in terms of difference between actual spread and a strike spread or in terms of the difference between the price of an Frn and a strike price Options, Futures, and other Derivatives, 5th edition 2002 by John C. HullOptions, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 27.22 Credit Spread Options • These provide a payoff dependent on movements in a particular credit spread. • There is usually no payoff in the event of a default on the reference asset • Payoff may be defined in terms of difference between actual spread and a strike spread or in terms of the difference between the price of an FRN and a strike price