nannan66

Junk bonds could have embedded options; OAS is recommended for spread analysis of bonds with embedded options. Kind of confusing to me.

IMO, the default risk has been factored in the prices of junk bonds(high yield bonds), so OAS shall reflect the default risk. This is not contradictory with what's in CFAI book...The default risk is not included in the OAS calculation, just like model risk not included in the OAS calculation.