What is the option adjusted spread

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Reference no: EM131279840

1. Explain what is meant by the nominal spread and the zero volatility spread? How are they computed?

2. Answer the following questions about valuing bonds with embedded options.

a. Explain how an increase in expected interest rate volatility can decrease the value of a callable bond?

b. What is the option-adjusted spread (OAS)?

c. Explain the impact of greater expected interest rate volatility on the option-adjusted spread of a security.

Reference no: EM131279840

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