**Duration-times-spread**

**Duration-times-spread** is a measure that is calculated when analysing the macro-factors that can potentially affect a credit portfolio. It is part of the top-down approach that fund managers and credit analysts use. On this page, we discuss how the duration-time-spread (DTS) can be calculated and how it can be used to analyze the credit risk in a portfolio.

**Duration-times-spread definition**

To calculate the **duration-times-spread**, we need the portfolio average option-adjusted spread (OAS) and the spread duration (also based on a market value weighted average).

- A higher
**OAS spread**implies that the portfolio is more exposed to credit risky assets. **Spread duratio****n**indicates how much the portfolio will change in value if the spread changes

Duration-times-spread combines the two as follows

or

where **S** is the spread and **SD **is the spread duration. The advantage of this approach is that it gives us a more comprehensive indication of credit risk than either alone. Let’s consider an example of how to calculate DTS.

**DTS example**

The following table implements DTS based on the OAS and spread duration. What is important here, is to keep in mind that we first need to calculate value-weighted measures of the OAS and spread duration.

The spreadsheet used can be downloaded at the bottom of the page.

**Summary**

We discussed the duration-times-spread, a useful measure to analyze the credit risk of a fixed income portfolio. This approach is used when performing top down analyses when executing fixed income (credit) strategies.

### Download the Excel spreadsheet

Want to have an implementation in Excel? Download the Excel file: Duration-times-spread example