A strategy involving the purchase of convertible securities and the subsequent...
A practice, usually of buying a convertible bond and shorting a percentage of the equivalent underlying common shares, to create a positive cash flow position (with expected returns above the riskless rate) in a static environment and benefits from capital appreciation should the convertible's premium. This form of investing is far from riskless and requires constant monitoring. See: Chinese hedge and setup
(go to top) A hedge fund investment strategy that seeks to exploit pricing inefficiencies between a convertible bond and the underlying stock. A manager will typically take a long position in the convertible bond and a short position in the underlying stock.
The simultaneous purchase of a convertible bond with a short sale of the underlying common stock.
An investment strategy that seeks to exploit pricing inefficiencies between a convertible security and the underlying stock. A manager will, in an effort to capitalise on relative pricing inefficiencies, purchase long positions in convertible securities (bonds, preferred stock or warrants), and hedge a portion of the equity risk by short selling the underlying common stock.
The basic premise of this strategy is based on the theory that the global convertible securities markets are generally inefficient. Prudent investors can buy undervalued convertible securities, and hedge a large portion of the risk by shorting the common stock of the same company.
A market neutral trading strategy that exploits relative mispricings of a firm's convertible bonds.
Convertible arbitrage is a market neutral investment strategy often associated with hedge funds. It involves the simultaneous purchase of convertible securities and the short sale of the same issuer's common stock.