- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 28. Valuation and Analysis of Bonds with Embedded Options
- Subject 4. Option-Adjusted Spread
CFA Practice Question
Bond A and B have similar characteristics and credit quality. The OAS for A is 10bps and the OSA for B is 20 bps. Which bond is likely to be overpriced if other things are assumed to be equal?
B. Bond B
C. We cannot draw a conclusion based on OAS.
A. Bond A
B. Bond B
C. We cannot draw a conclusion based on OAS.
Correct Answer: A
OAS is often used as a measure of value relative to the benchmark. A lower OAS indicates the bond is likely overpriced.
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