Introduction to Option-Adjusted Spread Analysis
“Introduction to Option-Adjusted Spread Analysis” by Tom Miller, published by John Wiley & Sons on May 1, 2007, is a revised and expanded edition that spans 176 pages. This book provides a clear explanation of option-adjusted spread (OAS) analysis, a method recognized by traders, investors, and analysts for its effectiveness in comparing and valuing securities that include options. The author presents each step of the OAS method in accessible language, making complex concepts easier to understand.
Readers will find detailed discussions on various topics, including the limitations of yield-based analysis for nonbullet bonds, modeling embedded options, and distinguishing between intrinsic and time components of option value. The book also covers how to model interest-rate volatility, calculate option-free prices and yields, and estimate the fair value of bonds. With its focus on practical applications in investments and securities, this edition serves as a valuable resource for professionals in the finance sector.
Official synopsis Publisher
Top traders, investors, and analysts agree that one method, option-adjusted spread (OAS) analysis, is the most useful way to compare and value securities with options. Nearly every day the bond market figures out a new way to structure securities, most of which involve options.
This book explains OAS analysis in plain English, presenting each step in the method clearly and concisely. Topics covered include:
- Why yield-based analysis breaks down for nonbullet bonds
- How to model put and call provisions as embedded options
- How to distinguish the intrinsic and time components of option value
- How to model interest-rate volatility, future interest rates, and future bond prices
- How to calculate option-free price and yield
- How to estimate the “fair value” of a bond
- How to calculate implied spot and forward rates
Salespeople, traders, and investors will want to read this book and keep it on their desks.
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