Both the option-adjusted (OAS) and the zero-volatility spread (Z-spread) are useful to calculate the value of a security. In general, a spread represents the difference between the two measurements. The OAS and Z-spread help investors compare the yield o...
If the security has embedded options, then theoption-adjusted spread(OAS) should be used. The OAS is the spread adjusted for the embedded options. To derive the OAS, thebinomial modelcan be used if cash flows depend on current interest rates but not on the path that led to the current i...