“The second valuation approach,” Jarvis continues, “uses the option-adjusted spread (OAS), a measure of relative value. In this instance, if the bond’s OAS is greater than the OAS of bonds with similar characteristics and credit quality, then it is most likely underpriced. One factor to consider is that if interest rate volatility declines, then the OAS and thus relative cheapness of Bond A will increase.”
Q. Are the comments made by Jarvis regarding OAS most likely correct?
A. No, she is incorrect about the impact of interest rate volatility.
B. Yes.
C. No, she is incorrect about determining under/overvaluation.
the OAS and thus relative cheapness of Bond A will increase这个东西我不能理解，cheapness增加是什么鬼？波动率减小，OAS不应该也是减小吗？
