The zero-volatility spread (Z-spread) is a measure of the difference between the forward rate and the spot rate for a particular maturity. The Z-spread is used to measure the risk of a security. A security with a low Z-spread is less risky than a security with a high Z-spread. The Z-spread can be used to compare different securities or to measure the change in risk for a particular security.
What Is the Zero-Volatility Spread (Z-Spread)?