- 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
True or False? The OAS can be negative if the assumed volatility of interest rates is high enough.
Correct Answer: True
User Contributed Comments 2
| User | Comment |
|---|---|
| danlan2 | OAS=Z-spread-option cost, so when the volatility of interest rates is very high, option cost is very high and OAS can be negative. |
| bodduna | High Volatility -> Low OAS Low Volatility -> High OAS |