Convertible Bond Arbitrage

As a result, investors considering a hedge fund that uses convertible arbitrage may want to carefully evaluate whether the potential return is balanced by the potential risks. Find out the advantages, disadvantages, and what the issue means from a corporate standpoint before buying in. The rationale behind a convertible arbitrage strategy is that the long-short position enables gains to be made with a lower degree of risk. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Share price is at This ratio compares the value of the position held through the use of the hedge in comparison to the entire position itself.

Convertible arbitrage is a trading strategy that involves taking a long position in a convertible security and a short position in the underlying common stock.

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BREAKING DOWN 'Convertible Bond Arbitrage'

A convertible arbitrage is a long-short trading strategy favored by hedge funds. We look at practical examples, returns, trades, risks, expectations & more. Day Traders use arbitrage tools — derivatives, leverage, short selling, synthetic securities — in many ways to generate profitable trades of stock and other securities. If you decide to do arbitrage, there are several useful strategies to follow including convertible arbitrage Like an ordinary. Convertible arbitrage is a type of equity long-short investing strategy often used by hedge funds. An equity long-short strategy is an investing strategy which involves taking long positions in stocks that are expected to increase in value and short positions in stocks that are expected to decrease in value.