What is the OAS indexed to?

Question

Quizplus · Accepted Answer

The OAS (Option-Adjusted Spread) is not directly indexed to any of these options. However, the closest related concept to OAS indexing in the given choices is "the cost of living," as it indirectly affects interest rates and bond yields, which are relevant to the calculation of OAS. However, this explanation does not accurately reflect the nature of OAS, which is a measure used in finance to calculate the spread of a fixed-income security rate or the yield of a derivative security to the risk-free rate of return, taking into account the optionality embedded in the security. My initial response was incorrect as it misunderstood the context of the question, which seems to be about a different OAS than the Option-Adjusted Spread. If the question refers to a pension or social security system like the Old Age Security (OAS) in Canada, then it would indeed be indexed to the cost of living, specifically through adjustments related to inflation to maintain purchasing power over time.

What Is the OAS Indexed To