How does option adjusted spread affect the valuation of digital assets?

1 answers

• Mar 19, 2022 · 3 years ago
  The option adjusted spread (OAS) is an important factor in the valuation of digital assets. It represents the additional yield that investors require to compensate for the embedded options in the asset. These options can include the right to convert the asset into another form or the right to receive a fixed payment at a future date. The OAS affects the valuation by adjusting the discount rate used in the valuation model. A higher OAS leads to a higher discount rate, which in turn lowers the present value of the asset's future cash flows and reduces its valuation. Conversely, a lower OAS results in a lower discount rate, increasing the present value of the cash flows and raising the asset's valuation. Therefore, the OAS is a key factor to consider when valuing digital assets and understanding their market value.
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