OAS - need some clarity

what is teh right equation? Z spread = OAS + optino cost or Nominal Spread = OAS = option cost ???

first one

not according to the schweser cheat sheet check out the FI portion of the cheat sheet and notice n = oas + option cost

That’s crazy. It’s def Z = OAS + option cost

I think schweser was a little confusing on this. Schweser said that usually Nominal should approximate the Z-spread so you could usually use both interchangeably. Of course leave it up to all our pals at the CFAI to not make this the case on exam day. that being said the 100% correct way to calc the Option cost is Z - OAS

i remember frmo level 1 and nom = z if the yield curve is flat ???

yes thats right but unless it says so in the problem Z does NOT = Nominal

so whcih equation do we use???/ nom or z schweser specifically states in thier cheat sheet nom = oas + option cost