S/F/25. Pricing Corporate Bond with Call Option - Option Adjusted Spread Analysis
(2004, 3000 words)
This essay looks at how Option-Adjusted Spread (OAS) analysis can be used to price corporate bond with embedded call feature. Our analysis is extended to find an incremental return or spread of a corporate bond over benchmark ¹ government bond return (or, yield) both with call feature and without.
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