Option-adjusted spread (OAS)
(a) The spread over an issuer's spot rate curve, developed as a measure of the yield spread that can be used to convert dollar differences between theoretical value and market price. (b) The cost of the implied call embedded in a MBS, defined as additional basis-yield spread. When added to the base yield spread of an MBS without an operative call produces the option-adjusted spread. |
Similar financial terms
SpreadA spread is either (a) the gap between bid and ask prices of a stock or other security, (b) The simultaneous purchase and sale of separate futures or options contracts for the same commodity for delivery in different months (also known as a straddle), (c) the difference between the price at which an underwriter buys an issue from a firm and the price at which the underwriter sells it to the public or (b) the price an issuer pays above a benchmark fixed-income yield to borrow money.
Spread transaction
A position in two or more options of the same type.
Spread option
AN option where the payoff depends on the difference between two market variables.
Horizontal spread
The simultaneous purchase and sale of two options that differ only in their expiration dates.
Yield spread strategies
Strategies that involve positioning a portfolio to capitalize on expected changes inyield spreads between sectors of the bond market.
Vertical spread
Simultaneous purchase and sale of two options that differ only in their exercise price.
TED spread
Difference between U.S. Treasury bill rate and eurodollar rate; used by some traders as a measure of investor/trader anxiety.
Spreadsheet
A computer program that organizes numerical data into rows and columns on a terminal screen, for calculating and making adjustments based on new data.
Spread strategy
Spreading is a strategy that involves a position in one or more options so that the cost of buying an option is funded entirely or in part by selling another option in the same underlying.
Spread income
Also called margin income, the difference between income and cost. For a depository institution, the difference between the assets it invests in (loans and securities) and the cost of its funds (deposits and other sources).
Relative yield spread
The ratio of the yield spread to the yield level.
Quality spread
Also called credit spread, the spread between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating. For instance, the difference between yields on Treasuries and those on single A-rated industrial bonds.
Maturity spread
The spread between any two maturity sectors of the bond market.
Bid-asked spread
The difference between the bid and asked prices.
Bull spread
A spread strategy in which an investor buys an out-of-the-money put option, financing it by selling an out-of-the money call option on the same underlying.
Calendar spread
Applies to derivative products. A strategy in which there is a simultaneous purchase and sale of options of the same class at the same strike prices, but with different expiration date.
Ted Spread
The difference between the price of the three-month U.S. Treasury bill futures contract and the price of the three-month Eurodollar time deposit futures contract with the same expiration month.
Crush Spread
In the soybean futures market, the simultaneous purchase of soybean futures and the sale of soybean meal and soybean oil futures to establish a processing margin.
Coastal Barrier Resource Act (CBRA)
The Coastal Barrier Resources Act (CBRA) restricts Federal expenditures and financial assistance that encourage development of coastal barriers so that damage to the property, fish, wildlife, and other natural resources associated with the coastal barrier is minimized.
Coastal Barrier Resources System (CBRS)
Designed to save Federal funds, protect human lives, and conserve coastal natural resources.
