By custom, some segments of the high-yield and emerging (EMG) debt markets still prefer to measure value by bond price or bond yield rather than spread. But for the rest of the global credit market, nominal spread (the yield difference between corporate and government bonds of similar maturities) has been the basic unit of both price and relative-value analysis for more than two centuries.

Many U.S. practitioners prefer to value investment-grade credit securities in terms of option-adjusted spreads (OAS) so they can be more easily compared to the volatility (“vol”) sectors (mortgage-backed securities and U.S. agencies).³¹⁶ But given the rapid reduction of credit structures with embedded options since 1990 (see structural discussion above), the use of OAS in primary and secondary pricing has diminished within the investment-grade credit asset class. Moreover, the standard one-factor binomial models³¹⁷ do not account for credit spread volatility. Given the exclusion of default risk in OAS option-valuation models, OAS valuation has seen only limited extension into the higher-risk markets of the quasi-equity, high-yield corporate, and EMG-debt asset classes.