Option-Adjusted Spread (OAS)
Also called: OAS, option adjusted spread
Option-adjusted spread is the Z-spread after removing the value of any embedded option, so bonds with and without call features can be compared on credit alone. Computing it requires a model of rate paths — usually a lattice or Monte Carlo — which makes OAS the most model-dependent of the common spread measures. Two desks can quote different OAS on the same bond purely because their volatility assumptions differ.
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