Cryptocurrency Q&A
What is the formula for OAS in CFA?
What is the formula for OAS in CFA?
Daniele
Tue Jul 23 2024
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6 answers
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As a CFA candidate, I'm curious about the intricacies of calculating the Option-Adjusted Spread, commonly referred to as OAS. Could you elaborate on the specific formula for OAS? I understand it's a metric used to compare the yield of a bond with an embedded option to a benchmark yield, but I'm looking for the mathematical representation. I'm aiming to grasp the nuances of how it accounts for embedded options like call and put provisions, and how that ultimately affects the bond's true yield. Your insights would be invaluable in my pursuit of understanding this complex yet crucial concept in the world of finance.
6 answers
MichaelSmith
Thu Jul 25 2024
The fundamental formula for OAS is the difference between the z-spread and the option cost.
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Michele
Thu Jul 25 2024
Irrespective of whether the option is a call or a put, this principle remains true.
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HallyuHeroLegend
Thu Jul 25 2024
For call options, the cost associated with them is positive, reflecting the premium paid for the right to buy.
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SsamziegangSerenadeMelody
Thu Jul 25 2024
The computation of OAS, or option-adjusted spread, is a crucial aspect in financial analysis.
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EnchantedNebula
Thu Jul 25 2024
Conversely, for put options, the cost is negative, signifying the potential premium received for the right to sell.
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