Option-Adjusted Spread
Option-Adjusted Spread (OAS) is the yield spread over a benchmark interest-rate curve that, after accounting for embedded options (such as prepayment or call features) in a fixed-income security, would discount its option-adjusted cash flows to its current price.
Example: A fixed-income analyst notes that a mortgage-backed security has an OAS of 85 basis points, indicating its price reflects about 0.85 percentage points of extra yield after accounting for prepayment risk via the model.
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