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Convertible Arbitrage |
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Convertible Arbitrage In the context of hedge funds, a style of management that involves the simultaneous purchase of a convertible bond and the short sale of shares of the underlying stock. Interest rate risk may or may not be hedged. Convertible arbitrage 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 benefit from capital appreciation should the convertible's premium rise. This form of investing is far from riskless and requires constant monitoring. See: Chinese hedge and setup How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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The current environment of falling interest rates could hardly be better for convertible arbitrage strategy. It's all dribs and drabs," says Jeff Cohen, managing director with Silverado Capital Management, a Saddle Brook, NJ-based convertible arbitrage fund. According to Michael Boxer, a former Shea & Gould attorney who is now manager of the real estate portfolio for Ramius, they conduct convertible arbitrage, manage a private equity fund, and manage what Boxer calls "a fund of funds. |
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