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Global Financial Markets Institute»Option Adjusted Spreads

Option Adjusted Spreads

This course examines the risk and return measurements associated with callable structures, such as mortgage backed securities. Whereas non-callable corporate bonds are priced as a spread to US Treasuries, bonds with embedded call options trade on an option adjusted spread (OAS) to Treasuries/swaps. This course will define OAS and introduce effective duration as the appropriate risk measure for bonds with embedded options. Bloomberg screens are used to understand which variables affect OAS, including interest rate changes, shifts in the yield curve, and volatility. Effective convexity is examined.

Course Objectives

By the end of the course, participants will be able to:

  • Discuss and contrast different yield curves
  • Explain different risk and return measures including
    • Nominal spreads
    • Z-spreads
    • Option adjusted spreads
    • Effective duration and convexity
  • Identify the variables that affect OAS

Suggested Prerequisites:

  • Fixed Income
  • Bond Math or equivalent knowledge

Program Level: Intermediate

Advance Preparation: None

Computers and Financial Calculators: Calculators

Recommended CPE Credits: 7

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  • About Us
    ▼
    • Our Story
    • Our Team
    • Our Clients
    • Strategic Alliance
    • Our Associations
  • Services
    ▼
    • Virtual Instructor Led Seminars
    • Training Needs Analysis
    • Custom Built Training
    • Subject Matter Experts
  • Training Courses
    ▼
    • Virtual Instructor Led Seminars
    • Alternative Investments
    • Asset Liability Management
    • Capital Markets
    • Commodities
    • Corporate Finance Course
    • Credit and Credit Analysis Course
    • Credit Derivatives
    • Derivatives
    • Digital Assets
    • Economics
    • Equities
    • Financial Statement Analysis Accounting
    • Fixed Income Courses
    • Foreign Exchange
    • Insurance
    • Municipals
    • Mutual Funds and ETFs
    • Operations
    • Portfolio Management
    • Quantitative Methods and Excel
    • Regulation and Compliance
    • Risk Management
    • Securities Lending — Repurchase Agreements
    • Securitization and Structured Finance
    • Structured Products
    • Wealth Management
  • Training Methods
    ▼
    • Classroom Training
    • Virtual Instructor-Led Training (VILT)
    • Online Learning — eLearning
    • Financial Simulation
    • Blended Learning
  • Insights
    ▼
    • eNews
    • Articles
    • Glossary
    • Blog
    • Case Studies
  • Contact us