The extra yield over a risk-free or benchmark rate that compensates for credit risk. It widens when default risk or risk aversion rises.
Where you will meet it
Credit spread comes up in 19 learning outcome notes across the FRM syllabus.
A few of them:
Corporate Bonds FRM Part I · Financial markets and products
“Credit spread risk is the risk that the bond's price falls because the spread over the benchmark widens, even though the issuer is still paying.”
Credit Risk Transfer Mechanisms FRM Part I · Foundations of risk management
“Credit spread options pay on spread movements without any default.”
Country Risk: Determinants, Measures, and Implications FRM Part I · Valuation and risk models
“A sovereign credit spread is the yield on its bond over the risk-free rate in the same currency, for example a USD sovereign bond over the US Treasury.”
Fundamentals of Credit Risk FRM Part II · Credit risk measurement and management
“Migration (downgrade) risk and credit spread risk cut market value even when no default occurs.”
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