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Basic Question 10 of 14
You have applied your favorite valuation model to a bond with an embedded option and found an option-adjusted spread (OAS) of 40 basis points, while the Z-spread has been calculated at 207 basis points. What is the option cost?
B. 185 basis points
C. 207 basis points
A. 167 basis points
B. 185 basis points
C. 207 basis points
User Contributed Comments 4
| User | Comment |
|---|---|
| olagbami | option cost: z spread-OAS |
| bodduna | Z spread = OAS + Option Cost |
| CJPerugini | If OAS < Zspread, then Call Option If OAS > Zspread, then Put Option |
| tomalot | My favorite bond valuation model...how can I choose just one!? |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
compare, calculate, and interpret yield and yield spread measures for fixed-rate bonds
CFA® 2024 Level I Curriculum, Volume 4, Module 7.