OAS Q

CFA Level II
#1

When computing the ED and EC of a bond with an embedded option, what assumption is made about the OAS when rates change? A) Positively Related B) Negatively Related C) Constant D) Need more information with respect to the underlying benchmark used

#2

D?

#3

OAS q gets no love?

#4

B)

#5

Is it C? For effective Duration you just do V rates down - V rates up divided by 2Vo(delta). EC I forget the formula but I know its similar. So it needs to stay constant?

#6

Its C…reading 57. Good rationale N75

#7

3_letters Wrote: ------------------------------------------------------- > When computing the ED and EC of a bond with an > embedded option, what assumption is made about the > OAS when rates change? > > A) Positively Related > B) Negatively Related > C) Constant > D) Need more information with respect to the > underlying benchmark used what the fuck is an ED or EC? wait is it effective duration and convexity? if thats the case then id go with C) because OAS already takes into account how the value of the option changes with rate changes. it could be B) though, having a liberal arts degree really screws me when I am reading something that is supposed to be straightforward.

#8

SeanC Wrote: ------------------------------------------------------- > 3_letters Wrote: > -------------------------------------------------- > ----- > > When computing the ED and EC of a bond with an > > embedded option, what assumption is made about > the > > OAS when rates change? > > > > A) Positively Related > > B) Negatively Related > > C) Constant > > D) Need more information with respect to the > > underlying benchmark used > > > what the fuck is an ED or EC? > > wait is it effective duration and convexity? > > if thats the case then id go with C) because OAS > already takes into account how the value of the > option changes with rate changes. > > it could be B) though, having a liberal arts > degree really screws me when I am reading > something that is supposed to be straightforward. Correct sir.

#9

well that just changes everything, this whole time I was trying to calculate the impact of rate changes on ED assuming it was erectile disfunction.