# Appropriate Spread Measures for Fixed Income Securities

Does the security have an embedded option that is typically exercised?

- If “No” us Z-Spread. This is the case for Plain Vanilla Corporate, Credit ABS and Auto Loan ABS.
- If “Yes”, is the amount of the cashflow interest rate path-dependent?
- If “Yes” use Option Adjusted Spread from a Monte Carlo Simulation
- If “No” use Option Adjusted Spread from Binomial Model

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