Having some difficulty to solve for excess spread, even with the errata updates.
My understanding for excess spread for A is : 1.4% - (0.933%*5.5) - 0.07% = -3.8015%
Even with rounding error, I have a negative number where solution is a positive number.
Thanks,
Your ∆spread is wrong.
Change in spread for A : 1.4%-(1.4%/3) = 0.9333%
The divide by 3 is the fall by 1/3, so the change is simply original OAS less the new lower OAS ?
That’s not the change.
Look carefully.
I’m following the same approach as example 28, which is showing E(OAS) - OAS = change in spread
For e.g. for A : E(OAS) - OAS = 1.575 - 1.05 = 0.525 %
I attach the example here for your reference.
Am I missing something else?
Thanks,
Suppose that when you started studying for this exam you weighed 185 lbs. Today, you weigh 202 lbs.
How much has your weight changed?
Got it now, I skipped the one simple step…
Thanks a lot !
My pleasure.
