CFA Practice Question

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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
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