Z-Spread vs OAS on Callable Bonds - Quant Trader Interview Question
Difficulty: Hard
Category: Algorithms & Data Structures
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Topics: fixed-income, z-spread, oas, callable-bond, option-pricing
Problem Description
You are analyzing a 5-year callable bond. The current yield curve is upward sloping. How does the Option-Adjusted Spread (OAS) typically differ from the Z-spread for this callable bond, and why?
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