Convertible Arbitrage: Insights and Techniques for Successful Hedging Hardcover - 2003 - 1st Edition

Summary

First line

The practice of convertible arbitrage includes the traditional purchase of a convertible while shorting its underlying stock, but also includes warrant hedging, reverse hedging, capital structure arbitrage, and various other techniques that exploit the unique nature of the global convertible and warrant marketplace.

From the jacket flap

Investment professionals familiar with convertible arbitrage techniques recognize the strategy as a rock-solid tool for generating significant returns regardless of market movements. It's no surprise, then, that amidst the backdrop of market volatility and investor uncertainty, the field of convertible arbitrage keeps growing. Since 1993, the convertible arbitrage market has grown at an astounding 45% compound annual growth rate through the first half of 2002 to $24 billion.*

In Convertible Arbitrage: Insights and Techniques for Successful Hedging, renowned investment expert Nick P. Calamos shows you ways to make the most of convertible arbitrage, explaining how to boost returns while decreasing risk-no matter what the market is doing.

The practice of convertible arbitrage takes advantage of the unique hybrid nature of convertible securities, which combine both fixed-income and equity characteristics. It typically involves matching a long position in convertible securities-usually convertible bonds-with a short position of corresponding stock. The bond pays interest and guarantees a yield upon maturity-but you also can participate in the movement of the underlying stock because a convertible bond's option component makes it readily convertible into stock. Convertible arbitrage thus allows investors to create positions that achieve either market-neutral returns or that have a bias towards a security's future price, offering tools to both the defensive and aggressive investor.

This not-to-be-missed guide gives you:

• A top-to-bottom overview of convertible arbitrage-its history, how it works, and why it is especially useful in a volatile market
• In-depth coverage of convertible valuation models and the "greeks," the statistical qualifications of convertible functions
• Reasons why the credit and business valuation of a convertible can make or break your hedge position
• A thorough review of convertible arbitrage techniques-from delta hedges and convertible option hedge techniques to swaps and nontraditional hedges
• An insider's guide to portfolio risk management, including tips on portfolio evaluation, risk analysis, and optimization

The array of convertible securities available-and the ever-shifting financial engineering behind them-demands a practical working knowledge of convertible arbitrage hedging techniques. Not only does Convertible Arbitrage put those techniques at your fingertips, it also helps you use those techniques to prepare for-and profit from-new twists in convertible terms, types of securities, or derivative hedge products.

*Tremont Advisers, Inc.

"The Calamos Convertible Fund offers the Holy Grail in investing-a long-term return superior to the index with less volatility."
-William Harding, Analyst
Morningstar Investment Services