“The option-adjusted spread measures the yield spread over the Treasury on-the-run yield curve.” Explain why you agree or disagree with this statement.
Answer to relevant QuestionsThe following excerpt is taken from an article titled “Call Provisions Drop Off” that appeared in the January 27, 1992, issue of BondWeek, p. 2: “Issuance of callable long-term bonds dropped off further last year as ...What is negative convexity? Explain how, given the cash flow on the simulated interest-rate paths, the average life of a RMBS is determined. Answer the below questions. (a) What assumption is made about the OAS in calculating the effective duration and effective convexity of a RMBS? (b) Is it warranted? In an article titled “CUNA Mutual Looks for Noncallable Corporates” that appeared in the November 4, 1991, issue of BondWeek, p. 6, Joe Goglia, a portfolio manager for CUNA Mutual Insurance Group, stated that he invests ...
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