Two portfolio managers are discussing the meaning of option adjusted spread. Here is what each asserted: Manager

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Two portfolio managers are discussing the meaning of option adjusted spread. Here is what each asserted:

Manager 1: “The OAS is a measure of the value of the option embedded in the bond. That is, it is the compensation for accepting option risk.”

Manager 2: “The OAS is a measure of the spread relative to the Treasury on-the-run yield curve and reflects compensation for credit risk and liquidity risk.”

Comment on each manager’s interpretation of OAS.

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The Theory And Practice Of Investment Management

ISBN: 9780470929902

2nd Edition

Authors: Frank J Fabozzi, Harry M Markowitz

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Question Posted: Dec 19, 2023 01:35 AM

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Two portfolio managers are discussing the meaning of option adjusted spread. Here is what each asserted: Manager

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Manager 1s interpretation of option adjusted spread OAS is correct OAS is indeed a measure of the va...View the full answer

The Theory And Practice Of Investment Management

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