Suppose that the option adjusted spread (OAS) of a callable bond is zero. Is it true that this callable's yield equals that of the noncallable counterpart? Explain your answer.
Added by Nichole M.
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Step 1: The option adjusted spread (OAS) of a callable bond is a measure of the yield spread over the risk-free rate that would make the present value of the bond's cash flows equal to its market price, taking into account the embedded option. Show more…
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