Describe how optionadjusted spread (OAS) is used to measure the value of prepayment options in MBS.
Optionadjusted spread (OAS) is a measure of the value of prepayment options in MBS. It represents the difference between the yieldtomaturity of an MBS and the yieldtomaturity of a comparable Treasury security with the same maturity. The OAS compensates investors for the risk of prepayment.