标题: Why Option Adjusted Spread and not Z Spread for MBS and ABS [打印本页] 作者: jcfa2011 时间: 2011-7-11 19:11 标题: Why Option Adjusted Spread and not Z Spread for MBS and ABS
Hi
I am curious about why OAS is used and not Z spread. Why should prepayment risk (as an option) be taken out and only OAS be used. Even that is a risk that has to be considered for pricing. So why is a security with higher OAS considered a cheaper security rather than a security with higher z spread. Kind of confusing. Can some one help me understand this.
thanks
