关于OAS是否variable

问题如下：

Muniz moves on to a discussion of the valuation of risky bonds with embedded options and asks if there is a metric that can be used to determine relative value and how such a measure is calculated. In response Scahill states: “The option-adjusted spread, or OAS, can be used to determine the value of a risky bond with embedded options. When assessing relative value for two bonds that are otherwise similar in all respects, the bond with the lower OAS is most likely underpriced or cheap.” Morgan adds: “The OAS is a variable spread that is based on the likelihood of cash flows occurring.” Gomaa disagrees with Scahill and Morgan, stating: “I believe OAS is the constant spread that when added to all one-period forward rates on the interest rate tree, equates the present value of the bond’s cash flows to the market price. Furthermore, for two bonds that have similar characteristics and credit quality, the bond with the higher OAS is underpriced.”

In response to Muniz’s question about the valuation of bonds with embedded options and relative value analysis, who is most likely correct?

选项：

A.

Morgan

B.

Gomaa

C.

Scahill

解释：

Correct Answer: B

B is correct, Gomaa is correct. The option-adjusted spread (OAS) is the constant spread that is added to all one-period forward rates on the interest rate tree and results in the present value of the bond’s cash flows, or arbitrage-free value, equaling the bond’s market price. Gomaa also correctly describes how to use OAS for relative valuation. For two bonds that have otherwise similar characteristics, the bond with the higher OAS is underpriced, or, alternatively, the bond with the lower OAS is overpriced.

A is incorrect. Morgan is incorrect. The OAS is the constant spread that is added to all one period forward rates on the interest rate tree (not the term structure) and results in the present value of the bond’s cash flows, or arbitrage free value, equaling the bonds market price.

C is incorrect. Scahill is incorrect. For two bonds that are otherwise similar in all respects, the bond with the lower OAS is most likely overpriced not underpriced.