What Is an Option-Adjusted Spread?

Option-adjusted spreads (OAS) are spreads that are relatively risk-free interest rates and are usually measured in base points (bp). Generally based on the Treasury spot interest rate curve (or the same issuer's spot interest rate curve) as the benchmark, a certain level of floating interest spread on this benchmark, taking into account the fluctuation of interest rates, discounting the option-adjusted cash flow to obtain the bond with rights The theoretical price, the spread level that eventually makes the theoretical price equal to the market price is OAS. OAS can be considered as compensation for multiple risks faced by investors (such as liquidity premium, default risk, model risk).

Option adjusted spread

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Option Adjusted Spread (OAS) is relative

With the 1980s

Through OAS we can get the following information:

Option cost

With right

Find out which is compared as OAS

China Development Bank is a pioneer in the innovation of China's bond market. Its financial bonds are second only to government bonds in terms of issue size, number of issuances, and transaction volumes, and have considerable influence in the interbank bond market. As of September 2004, China Development Bank issued a total of 17 bonds with rights in the inter-bank bond market and listed 15 (two in a combined listing). Among them, there are 5 bonds with callable rights of the issuer, 6 bonds with puttable rights of the holder, and 4 bonds with exchangeable rights of the holder. An attempt was made to use the OAS analysis method to analyze the pricing of CDB bonds and new bonds that the market agrees with.