nitoha

Nope. The z-spread is a really simple calculation where you take

Market price of bond = coupon1/(1 + r + z-spread)^t1 + .... + couponk/(1 + r + z-spread)^tk + principal/(1 + r + z-spread)^tk

The market price of a bond with an embedded option is different from a bond without an embedded option. Where you are getting messed up is that the z-spread is the spread over treasuries assuming that the bond is held to maturity. A high z-spread can be due to optionality, credit unworthiness, liquidity, taxation, etc..