" An oas of *** is appropraite for the bond"

[h21]

see the title, when cases mention this, does that mean it should be added on the binominal spots? My question about this is pretty conceptual, I do remember OAS is for pricing, and it is option adjusted spread, why can we just add this to the binominal tree to get the price?

 

[S2000magician]

OAS is added to binomial tree forward rates, not spot rates.
See the article I wrote on OAS: http://www.financialexamhelp123.com/option-adjusted-spread-oas/
Full disclosure: as of 4/25 I’ve installed the subscription software on my website, so there’s a charge for viewing the articles.