Do they trade at the same price and yields? Similar risk factors (effective duration, convexity, etc…?)
Why?
Not necessarily, if they have options (at least one of them) and the option is different from the option the other bond has, they trade at different prices,
The OAS is the spread that excluding optionallity makes the PV of a bond equal to the benchmark you are choosing…
So, if they have an option they differ, if they dont, they must trade at the same price buuut remember that in real life economy plays here and one can be more liquid in the real market than the other, remember that moves price (supply and demand), thats the way i get this…
Regards,
Jorge
As cokemicho said, the OAS is not the spread for the bond in question (unless it’s option-free); it’s the spread for the bond in question if all of its options were removed. The price, yield, effective duration , effective convexity, and so on will depend on the bond _ with all of its options intact _.
A 6% coupon, $1,000 par, semiannual pay, 10-year callable Treasury will have the same OAS as a 6% coupon, $1,000 par, semiannual pay, 10-year putable Treasury. They will have different prices, different yields, different effective durations, different effective convexities, different . . . from each other.
Thanks S2000 and cokemicho, makes a lot of sense.
You’re welcome.