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Introduction to Option-Adjusted Spread Analysis: Revised and Expanded Third Edition of the OAS Classic by Tom Windas

Book Description

Top traders, investors, and analysts agree that one method, option-adjusted spread (OAS) analysis, is the most useful way to compare and value securities with options. Nearly every day the bond market figures out a new way to structure securities, most of which involve options.

This book explains OAS analysis in plain English, presenting each step in the method clearly and concisely. Topics covered include:

  • Why yield-based analysis breaks down for nonbullet bonds

  • How to model put and call provisions as embedded options

  • How to distinguish the intrinsic and time components of option value

  • How to model interest-rate volatility, future interest rates, and future bond prices

  • How to calculate option-free price and yield

  • How to estimate the "fair value" of a bond

  • How to calculate implied spot and forward rates

Salespeople, traders, and investors will want to read this book and keep it on their desks.