Bond valuation

And then option adjusted spread adjusts for callable and puttable bonds.

So bond valuation.

So the value of any bond is the present value of the expected future cash flows.

And that's sort of a standard idea in finance that almost anything the value of any financial instrument is the present value of the expected cash flows and usually adjusted for risk right and so the credit spread adjusts for the risk and everything else is just present valuing of cash flows so if we have here a bond and there's three payments we'll say there's a coupon a coupon and a principal and interest so the coupon plus the principal amount they will all be discounted to the present value and that is the value of the bond.