OAS and Z spread
I’m having trouble grasping the z spread and OAS spreads clearly. It seems that a z-spread > OAS means that the issuer has a call option. My confusion is that wouldn’t the lower OAS mean that the bond is discounted at a lower rate, thus a higher present value than without the call option. Why would somebody be willing to pay more when there is a call option?
Thanks in advance and let me know if my explanation needs any clarification.
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