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Which of the following statements concerning the option-adjusted spread (OAS) is least accurate? A) The OAS reflects credit risk and/or liquidity risk differences between the
Which of the following statements concerning the option-adjusted spread (OAS) is least accurate?
A) The OAS reflects credit risk and/or liquidity risk differences between the bond and the benchmark securities used to create the interest rate tree.
B) The OAS removes credit risk from nominal spreads.
C) The OAS is the interest rate spread that must be added to all of the 1-year forward rates in the binomial tree so that the arbitrage-free value of a bond generated by the tree is equal to its market price
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