I have read the Lehman Brother's paper on OAS which I mostly understand, they outline how to find the OAS for a callable bond of which the formula is effectively (ignoring refinancing costs):
Market Price Callable = Value of Stripped Bond - Value of Option
They proceed to simulate a number of interest rate paths using zero coupon interest rates from the treasury curve and then pricing the stripped bond and the option they arrive at a price which is too high, thus we need to add the OAS spread in order to discount the price to the market price of the callable. The spread value that achieves this is the OAS.
My question therefore is, how do you price the callable bond in the first place if I was the issuer before having the OAS, I think my confusion is that the calculated price in this case is too high and therefore adding the OAS discounts further to equal the market price but if we don't know the OAS surely calculating the price of the stripped bond minus the price of the option will not equal that of the market price.