OAS = Option-Adjusted Spread

OAS is a measure used to evaluate the yield spread of a bond that has embedded options, such as callable or putable bonds, relative to a risk-free benchmark. It adjusts the spread to account for the option, which affects the bond’s risk and expected return. OAS is a useful tool for comparing different types of bonds, as it provides a more accurate reflection of the additional yield an investor would earn, considering the value of any embedded options. A higher OAS typically indicates greater compensation for risk.