[Quantlib-dev] bond spreads/option adjusted spreads

[Allen K. <zho...@gm...>]

Hi:



I am interested in calculating the spread over a reference zero curve
(Fabozzi's "zero volatility spread") for a bond. I would approach via Newton
Raphson iteration, varying the spread (using ZeroSpreadedTermStructure) to
make NPV() match the market quote on the bond. I would look to create a
method under Bond to do this, e.g. myBond.zeroVolSpread(Handle<Quote>
marketQuoteCleanPrice).



What I was ultimately trying to get at was the CallableFixedRateBond "option
adjusted spread" (OAS). I was looking at Fabozzi and his OAS for a callable
bonds was the constant rate added to all the nodes on his binomial short
rate tree that make the NPV equal the observed market price. Isn't  the
spread over the tree a spread over forward rates, rather than zero rates ?
Could I instead compute the spread the same way as I do for a non-callable
bond, as mentioned above, by varying the spread over the input reference
zero curve so that the the forward rate tree gets "raised" by the spread
automatically/implicitly when you do this ? This would be easier than to go
into the ShortRateModel and add the spread to each node of the tree.



Thanks,

GZH