It stands for option-adjusted spread; the credit spread that is added over the spot rates (the Treasury spot rate curve, the LIBOR rate curve, etc) for an issuer after adjusting for the embedded options. Using the LIBOR curve, it is the flat continuously compounded spread to the LIBOR zero rate which reprices the corresponding bond. It was historically used to value the embedded issuer option in callable bonds. However, it can also be used to quantify the effect of credit (i.e., it can be used to measure the excess yield due to credit). Essentially, this spread is can be used to convert dollar differences between an instrument’s value and its market price. Therefore, it is often used to reconcile value with market price.

It is also known as a zero volatility spread.