OAS and Z Spread for Valuation

I saw there were tons of topics about these two concepts in the forum. However, there is one thing that unfortunately is still not clear to me.

Can we use Z spread to value a callable, putable, or anything that has an embedded option attached to the bond? I thought we could because Z spread contains the option feature, but apparently, we should use OAS which I don’t get why as OAS is the value of the bond without option, so I thought the Z spread was appropriate. However, as I was doing one question, I totally messed up.


What you can’t do is use the z-spread to compare bonds with different embedded options. Because the OAS removes the value of the embedded options, you’re left comparing option-free bonds, which is much easier.

so basically we cant use Z spread to compare callable to a putable bond, but in that case, we would use OAS to remove the option part and put them on the same level- apple to apple comparison