Hi David,
on P770 of his book, Fabozzi said that slowing down the prepayment will increase OAS and the price of the collateral and this is because the collateral is above the par,
I have the following questions:
1. why is collateral above the par? just an assumption?
2. why should OAS and price of collateral go in the same direction? I feel if OAS increases the yield increases so the price decreases..
thanks.
on P770 of his book, Fabozzi said that slowing down the prepayment will increase OAS and the price of the collateral and this is because the collateral is above the par,
I have the following questions:
1. why is collateral above the par? just an assumption?
2. why should OAS and price of collateral go in the same direction? I feel if OAS increases the yield increases so the price decreases..
thanks.