c***s
发帖数: 2 | 1 When you calculate OAS of a callable bond, assume the market price is known,
there are two ways:
1. to build a interest rate tree, and add a spread to each node of the tree
and price the bond cash flows without the callable feature and until you
match the market price; the spread is on top of the forward rate
2. just use the bond (zero) curve, add spread on each curve instrument until
you match the market price. the spread is on top of the zero rate
so when to use each method and difference? | c**********s
发帖数: 295 | 2 OAS, by its name, is the option adjusted spread. you turn off the callable
feature, which is the option part, what you are calculating.
with the callable feature, 1 is oas, 2 is zvol oas, which means what spread
you will make if there is no vol. the difference between 1 and 2 is the
spread you are paying for the vol.
in fact as i remember the spread is on top of the short rate. | b*****g
发帖数: 20 | 3 This is really based on your product's benchmark, treasure curve or libor
curve. For example, Swap trading product probably will use libor curve.
known,
tree
until
【在 c***s 的大作中提到】
: When you calculate OAS of a callable bond, assume the market price is known,
: there are two ways:
: 1. to build a interest rate tree, and add a spread to each node of the tree
: and price the bond cash flows without the callable feature and until you
: match the market price; the spread is on top of the forward rate
: 2. just use the bond (zero) curve, add spread on each curve instrument until
: you match the market price. the spread is on top of the zero rate
: so when to use each method and difference?
| c******s
发帖数: 58 | 4 Didn't the last statement tell you what the difference is?
The 2nd one is a fixed spread on top of zero curve, the 1st one is a fixed
spread on top of forward rates. If you then bootstrap the forward rates to
construct the zero curve, the spread won't be fixed across terms.
known,
tree
until
【在 c***s 的大作中提到】
: When you calculate OAS of a callable bond, assume the market price is known,
: there are two ways:
: 1. to build a interest rate tree, and add a spread to each node of the tree
: and price the bond cash flows without the callable feature and until you
: match the market price; the spread is on top of the forward rate
: 2. just use the bond (zero) curve, add spread on each curve instrument until
: you match the market price. the spread is on top of the zero rate
: so when to use each method and difference?
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