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How is the option-adjusted spread (OAS) computed using the Monte Carlo simulation model? The OAS is the value of the spread that, when added to all of the simulated spot rates, makes the: A. average of the present values from the simulated cash flow paths equal to the market price of the mortgage-backed security. B. present value of cash flows equal to the market price of the mortgage-backed security. C. theoretical present value, assuming no prepayments, equal to the market price of the mortgage-backed security. D. theoretical present value, assuming a constant prepayment rate, equal to the market price of the mortgage-backed security. |