An investment strategy where one position is taken in convertible fixed-income securities while an offsetting position is taken in the underlying common stock. The goal is to take advantage of the disparity between the strike (conversion) price and the stock price at the required conversion time. The move is typically neutral (no gain or loss) but the volatility risk is lowered; this allows the arbitrageur to obtain the stock with less risk. For example, a convertible bond is purchased while short-selling the stock.
Related information about convertible bond arbitrage:
- Convertible arbitrage - Wikipedia, the free encyclopedia
Convertible arbitrage is a market-neutral investment strategy often employed by hedge funds. It involves the simultaneous purchase of convertible securities and ...
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An arbitrage strategy that aims to capitalize on mispricing between a convertible bond and its underlying stock. The strategy is generally market neutral; in other ...
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Comprehensive article on the basics of convertible bond arbitrage - a low risk strategy of playing the stock market. Part 1 of 2.
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between convertible bond arbitrage and traditional long only equity portfolios is non-linear. Results indicate that convertible bond arbitrage returns are positively ...
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Nov 25, 2010 ... A more recent advent has been the emergence of hedge funds who specialize in convertible bonds and convertible bond arbitrage. Convertible ...
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The goal of convertible bond arbitrage is to consistently make money regardless of market conditions and to do so with minimal volatility. The basic mechanics of ...
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Jun 27, 2012 ... In an uncertain world, convertible bond arbitrage has much to offer in downside protection and potential upside. Greater volatility increases the ...
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Table 2: Attributes of a Convertible Bond Arbitrage Trade. 3. Component. Attribute. Stock. ▫ Volatile underlying stock price. ▫ Low dividend. ▫ Available stock to ...