Definitions for "convertible arbitrage"
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.