Schweser mock, v.2, exam.1 Q:108
Solution: OAS reflect average spreads over the Treasury sport rate curve.
Is this one of the definition of OAS? Can’t find it… Thanks.
Schweser mock, v.2, exam.1 Q:108
Solution: OAS reflect average spreads over the Treasury sport rate curve.
Is this one of the definition of OAS? Can’t find it… Thanks.
OAS is a spread over a (usually Treasury) nonzero-volatility spot curve. Perhaps by “average spread” they mean that the same spread is used at each node on the interest rate tree. I don’t recall seeing that specific wording elsewhere. In any case, your quote omits that the spread is for the bond with the value of any embedded options removed; that’s the important point.
I think what they’re getting at is a reference to the Monte Carlo simulation where averaging NPVs occurs to derive the OAS; not particularly well written here.
Thanks ro424, Magician!
My pleasure.