Author: Sebastian P. Werner Publisher: Springer Science & Business Media ISBN: 3834960039 Category : Business & Economics Languages : en Pages : 269
Book Description
Sebastian Werner examines aggregate short sales and convertible bond arbitrage, which is a typical hedge fund strategy that involves a significant short position in the underlying stock of a long convertible bond position for hedging purposes. He provides insightful and new observations of the significant difference in the trading pattern, information content and resulting impact on stock returns of arbitrage- versus valuation-based short selling activities.
Author: Nick P. Calamos Publisher: John Wiley & Sons ISBN: 1118045661 Category : Business & Economics Languages : en Pages : 306
Book Description
Minimize risk and maximize profits with convertible arbitrage Convertible arbitrage involves purchasing a portfolio of convertible securities-generally convertible bonds-and hedging a portion of the equity risk by selling short the underlying common stock. This increasingly popular strategy, which is especially useful during times of market volatility, allows individuals to increase their returns while decreasing their risks. Convertible Arbitrage offers a thorough explanation of this unique investment strategy. Filled with in-depth insights from an expert in the field, this comprehensive guide explores a wide range of convertible topics. Readers will be introduced to a variety of models for convertible analysis, "the Greeks," as well as the full range of hedges, including titled and leveraged hedges, as well as swaps, nontraditional hedges, and option hedging. They will also gain a firm understanding of alternative convertible structures, the use of foreign convertibles in hedging, risk management at the portfolio level, and trading and hedging risks. Convertible Arbitrage eliminates any confusion by clearly differentiating convertible arbitrage strategy from other hedging techniques such as long-short equity, merger and acquisition arbitrage, and fixed-income arbitrage. Nick Calamos (Naperville, IL) oversees research and portfolio management for Calamos Asset Management, Inc. Since 1983 his experience has centered on convertible securities investment. He received his undergraduate degree in economics from Southern Illinois University and an MS in finance from Northern Illinois University.
Author: Darwin Choi Publisher: ISBN: Category : Languages : en Pages : 58
Book Description
In the context of convertible bond issuance, we examine the impact of arbitrage activity on underlying equity markets. In particular, we use changes in equity short interest following convertible bond issuance to identify convertible bond arbitrage activity and analyze its impact on stock market liquidity and prices for the period 1993 to 2006. There is considerable evidence of arbitrage-induced short selling resulting from issuance. Moreover, we find strong evidence that this activity is systematically related to liquidity improvements in the stock. These results are robust to controlling for the potential endogeneity of arbitrage activity.
Author: John Hackney Publisher: ISBN: Category : Languages : en Pages : 55
Book Description
Prior literature examines the effect of either informed or arbitrage short selling on equity markets. We test the relative importance of informed and uninformed short selling around convertible bond issues and earnings announcements for the same firms over the same time period. Convertible arbitrage short selling is associated with temporary price pressure, consistent with downward sloping demand curves. Earnings announcement short selling is consistent with informed traders who anticipate future returns. Firm-specific characteristics related to the cost of short selling similarly affect both informed and arbitrage short selling. Deal-specific characteristics capturing hedging demand also strongly determine convertible arbitrage short selling.
Author: Oktay Urcan Publisher: ISBN: Category : Languages : en Pages : 46
Book Description
We bring together two streams of research: one on earnings management and the other on convertible bond arbitrage. In doing so, we bring new insights on why convertible bond hedge funds benefit from convertible bond arbitrage. Specifically, we find that firms managing their earnings prior to their convertible bond issuance have: (1) poorer stock market and earnings performance after their issuance of convertible debt, (2) higher idiosyncratic volatility prior to issuance, (3) more equity like convertible bonds, and (4) an abnormal increase in the short selling of their stocks after issuance of convertible bond. Consequently, we provide evidence consistent with the notion that earnings management prior to the issuance of convertible bonds is a source of profits for convertible bond hedge funds that pursue convertible bond arbitrage.
Author: Xiaoyang Li Publisher: ISBN: Category : Languages : en Pages : 50
Book Description
Consistent with hedge funds trading on privileged information during the wall-crossing period, we document negative abnormal returns and abnormally high short selling in the trading days just prior to the private placements of U.S. convertible bonds, no pre-placement negative abnormal returns and less pre-placement abnormal short selling volume for convert issuers who engage in related stock buybacks, and more pre-placement short selling for convert issues subject to more intense post-issue short selling. Alternative explanations for our results are rejected because pre-placement anomalies are related to specific terms of the converts and related buybacks. Short interest disclosure needs to be more transparent and Regulation Fair Disclosure better enforced.
Author: Nick P. Calamos Publisher: John Wiley & Sons ISBN: 0471423610 Category : Business & Economics Languages : en Pages : 310
Book Description
"Convertible Arbitrage" ist ein praxisorientierter und umfassender Ratgeber, der sich mit einer interessanten Investmentstrategie auseinandersetzt - der 'Convertible Arbitrage'. Bei dieser Strategie geht es darum, ein Portfolio aus wandelbaren Wertpapieren anzulegen - in der Regel Wandelanleihen -, wobei das Risiko teilweise dadurch abgesichert wird, dass die zugrundeliegende Stammaktie leerverkauft wird. Diese Strategie erfreut sich wachsender Beliebtheit und ist insbesondere in Zeiten hoher Marktvolatilität von Nutzen, denn sie ermöglicht Finanzexperten eine Steigerung der Rendite bei einer Verringerung des Risikos. "Convertible Arbitrage" erläutert diese einzigartige Investmentstrategie fundiert und detailliert. Mit einer Fülle von Experten-Informationen. Autor Nick Calamos ist ein anerkannter Fachmann auf diesem Gebiet. Er ist regelmäßig auf CNBC zu sehen und wird häufig von Fachzeitschriften interviewt.
Author: Samira Shirgir Publisher: ISBN: Category : Languages : en Pages : 81
Book Description
In recent years companies issuing convertible bonds enter into some transactions simultaneously in order to mitigate some of the negative impacts of issuing convertible bonds such as the dilution of existing shares. One of the popular concurrent transactions is a call-spread overlay which is intended to reduce the dilution impact. This thesis explores the motivation for using these combined transactions from the perspective of the issuers, investors, and underwriters. We apply a binomial method to price the convertible bonds with call-spread which are subject to default risk. Based on previous empirical studies convertible bond issuers experience a drop in their stock price due to the activities of convertible bond arbitrageurs when the issuance of convertible bonds is announced. We propose a model to estimate the drop in the stock price due to convertible bond arbitrage activities, at the time of planning the issue and designing the security that will be offered. We examine the features of the model with simulated and real-world data.
Author: Joseph A. Walker Publisher: John Wiley & Sons ISBN: 0471534641 Category : Business & Economics Languages : en Pages : 222
Book Description
Combines a history of short selling with current strategies and applications to present a complete guide to this increasingly popular investment tool. Procedural and regulatory requirements are mixed with actual case studies and examples that readers can apply to specific situations. Risks and rewards of short selling are discussed in detail as are short selling as a tool for protecting other investments and for speculation.
Author: Mark Mitchell Publisher: ISBN: Category : Arbitrage Languages : en Pages : 0
Book Description
We study three cases in which specialized arbitrageurs lost significant amounts of capital and, as a result, became liquidity demanders rather than providers. The effects on security markets were large and persistent: Prices dropped relative to fundamentals and the rebound took months. While multi-strategy hedge funds who were not capital constrained increased their positions, a large fraction of these funds actually acted as net sellers consistent with the view that information barriers within a firm (not just relative to outside investors) can lead to capital constraints for trading desks with mark-to-market losses. Our findings suggest that real world frictions impede arbitrage capital.
Author: Sebastian P. Werner
Author: Nick P. Calamos
Author: Darwin Choi
Author: John Hackney
Author: Oktay Urcan
Author: Xiaoyang Li
Author: Nick P. Calamos
Author: Samira Shirgir
Author: Joseph A. Walker
Author: Mark Mitchell