OAS

CFA Level II
#1

So confused . after deduct the OAS from nominal spread , should leave the Credit risk and liquidity risks. how come option risk?

Please add some comments

Which kind of risk remains if the option-adjusted spread is deducted from the nominal spread?

A) credit risk. B) liquidity risk. C) option risk.

Your answer: C was correct!

The OAS captures the amount of credit risk and liquidity risk.

#2

OAS captures credit and liquidity risk. Nominal spread captures credit, liquidity and option risk.

Nominal (C + L + O) - OAS (C + L) = O risk

#3

This is garbage. Nominal spread is for difference in YTM. OAS is relative to spot rates - how can you simply compare!!!