CFA CFA Level 2 Question of the Week: Level 2 – Fixed Income

Question of the Week: Level 2 – Fixed Income

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    • Avatar of MarkMeldrumMarkMeldrum
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        The correct answer is Option A. 

        Lowering the OAS from 55bps to 25bps lowers all the forward rates in the interest rate tree by 30bps.  This will result in higher bond values at each node increasing the probability of a call.  This will increase the value of the call option.

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