Business and Personal Finance Dictionary
# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
- OPTION ADJUSTED SPREAD MODEL
Is an approach whereby securities are evaluated by considering the implied option characteristics. Two key variables are interest rate and prepayment rate behavior. These models incorporate the average spread of the Mortgage Backed Security or CMO tranche to the treasury yield curve. The usual reason for differences in evaluations is due to assumptions and modeling efforts for prepayments.Back