QUICK DEFINITION
OAS is option-adjusted spread: the spread over a benchmark curve after adjusting for the value of embedded options.
WHY IT MATTERS
Why OAS matters in bond markets
OAS helps compare bonds whose callable or prepayable cash flows would otherwise distort simple spread measures.
MARKET CONTEXT
How to think about it
Bond investors use oas as part of a wider framework that links prices, yields, cash flows, liquidity and risk. The concept should therefore be read together with its related terms rather than as an isolated definition.
Is OAS important for fixed-income investors?
← Back to the Bond Market Glossary Yes. OAS helps compare bonds whose callable or prepayable cash flows would otherwise distort simple spread measures.