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

GLOSSARY

American option. An option that may be exercised over a time period that begins sometime before, and terminates on, the option expiration date. See European option.

arbitrage-free binomial tree of risk-free short rates. See lognormal model.

at-the-money option. An option whose strike price is equal or close to the underlying security’s current market price.

benchmark yield curve. The yield curve described by benchmark, or risk-free, notes and bonds. In the United States, the most recently issued Treasury bills, notes, and bonds are considered benchmark issues.

Bermudian option. With regards to fixed-income securities, any embedded option whereby the bondholder has sold the issuer the right to repurchase the bond back from the investor, ...