http://www.analystforum.com/foru ... l-ii-forum/91333114

To be clear, they’re talking about the calculated OAS, not the actual OAS.

Clearly, if you change your assumption about the volatility of interest rates and leave the price of the bond (with the embedded option) unchanged, the OAS you calculate will change.  That’s not a property of OAS; that’s a property of your assumption.  If the volatility of interest rates really changes, then the market price (reflecting the true volatility) will also change, and the (true) OAS will stay the same.

Take the basic equation:

OAS = Z-spread - Option Cost

To s2000magician’s point above, everything is affected, it’s just a matter of what variables you change.

so, if you assume price is fixed, and change your vol assumption, OAS changes and Z-spread stays the same (Z-spread doesn’t change because you haven’t changed the price of the security)

if you assume price adjusts with vol (which is what really happens in the market), then OAS stays the same and z-spread changes (put differently, you require the same OAS despite the vol change so when you use the same OAS to discount back you get a different price)

This is why the reading states “For a given bond price”

结论

根据OAS = z-spread - option cost (call)

      OAS = z-spread + option cost (put)

for a given bond price (stupid as that is):

• An increase in the assumed volatility of interest rates will increase the value of call and put options, decreasing the OAS on callable bonds and increasing the OAS on putable bonds
• A decrease in the assumed volatility of interest rates will decrease the value of call and put options, increasing the OAS on callable bonds and decreasing the OAS on putable bonds