# Yield of Callabale/Non Callable Bond

I encountered this question, looking for the answer. Yield = RFR + OAS Is this statement True/False for Callable and Non-Callable bond?

This is true only for non-callable bond with Risk-free security (whichever way defined) as the benchmark.

What about callable bond? Can we get any relation in terms of RFR to get its yield?

Sorry friends, but I thought this (Yield = RFR +OAS) is true for any Bonds with embedded option! I thought the definition of OAS was - the spread above the RFR at which it would be trading if the bond actually didnt have any embedded options.

Is ‘RFR + OAS = Yield’ or ‘RFR + ZVS = Yield’?

RFR + OAS = Yield for a bond with embedded option. ZVS = OAS only for option free bonds. Z spread as the name suggests ignores the impact of volatility of Interest rates on the cash flow of bond with options. Z spread = OAS for option free bond The relationship is given by the following Z spread = OAS + Option Cost (this could be +ve or -ve). SInce for an option free bond option cost is 0, z-spread = OAS

Thank you C3Po. So in short the answer is true for both - isnt it?

It implies that for option free bond the Yield = RFR + OAS (here OAS = ZVS) and for bond with embedded option Yield = RFR + OAS + Option cost And the general formula is Yield = RFR + ZVS? Correct me if I’ve understood it wrong.

Exactement!

Actually, It is not yield - it is the spot rate that is equal to RFR + OAS for an option free bond… be very careful.

Hi just want to confirm ZVS=zero volatility spread?

Hi just want to confirm ZVS=zero volatility spread?

Thats right f55781…