off-the-run & on-the-run

off-the-run
A term used to describe all but the most recently issued treasury or agency securities in a particular maturity class. For example, at any given time, there may be a number of U.S. Treasury security issues with remaining lives of about two years. The most recently issued two year securities are described as on-the-run. All the rest are described as off-the-run. Off the run securities trade at wider spreads than similar securities that are actively quoted or traded. They may also trade at slightly lower prices(higher yields).

on-the-run
A term used to describe the most recently issued treasury or agency securities in a particular maturity class. For example, at any given time, there may be a number of U.S. Treasury security issues with remaining lives of about two years. The most recently issued two year securities are described as on-the-run. (All the rest are described as off-the-run.) On the run securities trade at narrower spreads than similar securities that are less actively traded. They may also trade at slightly higher prices(lower yields).

option-adjusted duration	A duration measure that does allow for changes in cash flows as yields change A variation of effective or empirical duration. Option adjusted duration incorporates the expected duration-shortening effect of an issuer's embedded call provision. It is also called adjusted duration.
option-adjusted spread (OAS)	(1) A measurement of the return provided to an investor from a financial instrument that is either an option or that includes an option. The option-adjusted spread calculations break up a security into separate cash flows. Each of those cash flows is discounted at a unique discount rate appropriate for its maturity. The discount rates are obtained from a benchmark yield curve. The benchmark yield curve is simply the currently available (spot) yields for risk-free investments of various maturities. Since U.S. Treasury obligations are not considered to have any credit risk, Treasury rates are used. OAS is not quoted as a yield. Instead, it is quoted as a difference, or spread, in basis points. (2) A valuation technique for valuing financial instruments, portfolios of financial instruments, or financial institutions with options. This tool is one component used in the Office of Thrift Supervision net portfolio value model for modeling the interest rate risk in complex financial instruments. This methodology is also used by high-end commercial interest rate risk analysis models.
option risk	The risk that a change in prevailing interest rates will lead to an adverse impact on earnings or capital caused by changes in the timing of cash flows from investments. Cash flows may be received earlier than expected as a result of the exercise of options or of embedded options in financial contracts. One of the four primary components of interest rate risk. Option risk usually arises when a change in prevailing interest rates prompts the option holder to exercise the option. See option.

original-issue discount (OID)

The amount of the difference between the par or redemption price and the price of the security at the time of its original issue. Issuers can issue securities with OID as an alternative to making periodic interest payments as a means of compensating investors. Zero coupon notes, strips, discount notes, and banker’s acceptances are examples of investment types with OID. For those instruments, the return provided to the investor comes in the form of a discount. OID should not be confused with the discounts that investors may pay for either coupon-bearing instruments or discount instruments resulting from a change in prevailing rates subsequent to the issuance of a security. OID is subject to different income tax treatment than discounts resulting from changes in market prices.

over the counter (OTC)

Purchases and sales of financial instruments that do not take place in organized exchanges such as the New York Stock Exchange or the Chicago Board of Trade are termed over the counter. The phrase may be used as a noun to describe capital markets other than organized exchanges. The phrase may also be used as an adjective to describe instruments not traded on an organized exchange, such as over-the-counter derivatives.