Fixed-Income Arbitrage

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Fixed-Income Arbitrage

An arbitrage strategy in which one seeks to profit from small differences in interest rates between two bonds or other fixed-income securities that are otherwise essentially the same. One conducts this by taking opposite positions in the two securities. Fixed-income arbitrage rarely results in a large profit and can be quite risky. As a result, many analysts advise against using it.
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Daniels Webster s extensive financial industry experience includes serving as Executive Vice President, JPMorgan Chase s firm-wide Market and Fiduciary Risk Management until 2005, and prior to that as the global head of US Dollar Fixed Income Derivatives at UBS and head of Fixed Income Arbitrage trading at Chase Manhattan Bank.
21 per cent, the fifth consecutive monthly gain for this index, with positive contributions from Fixed Income Arbitrage, Volatility Arbitrage and Asset Backed exposures.
Stark contrasted the historical performance of five indices against the S&P 500 and the Lehman High Yield Credit Bond Index over the past 10 years -- convertible arbitrage, distressed securities, the equity market neutral index, the fixed income arbitrage and the merger arbitrage.
In addition to long investments in fixed income and equity securities, the Fund will also deploy convertible arbitrage, event-driven arbitrage and fixed income arbitrage strategies, among other investing and trading strategies.
In July RMF GEM invested $50 million in the flagship product of 5:15 Capital Management, an unrelated fixed income arbitrage manager based in Connecticut.
Fixed income arbitrage managers generated a significant portion
Barnegat was up 406% with an Annualized Volatility of 16%1 The S+P 500 was down 8% with an Annualized Volatility of 22%2 Global Stocks were up 14% with an Annualized Volatility of 18%3 Emerging Market Stocks were up 308% with an Annualized Volatility of 20%4 Fixed Income Arbitrage Hedge Funds were down 1% with an Annualized Volatility of 12%5 Overall, Hedge Funds were up 55% with an Annualized Volatility of 7%6 US Bonds were up 69% with an Annualized Volatility of 5%7 Global Bonds were up 97% with an Annualized Volatility of 8%8 Emerging Market Bonds were up 161% with an Annualized Volatility of 9%9 As a comparison to US Cash, investing in Fed Funds returned 26%
Fixed Income Arbitrage is also looking to post a strong month at 2.
While fixed income arbitrage managers were able to profit from relative value
Fixed Income Arbitrage, as a percentage of the CS Tremont Hedge Fund Index, is at an all-time low, highlighting the diminished competition.
Mortgage-related instruments continued to be a driver of returns for a number of Fixed Income Arbitrage managers in August.

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