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Covered interest arbitrage |
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Covered interest arbitrageA combination of transactions on two countries' securities and exchange markets designed to profit from failure of covered interest parity. A typical set of transactions would include selling bonds in one market, using the proceeds to buy spot foreign currency and foreign bonds, and selling forward the return at a future date. See also one-way arbitrage.Covered interest arbitrageOccurs when a portfolio manager invests dollars in an instrument denominated in a foreign currency and hedges the resulting foreign exchange risk by selling the proceeds of the investment forward for dollars.Covered interest arbitrage Similar MatchesArbitrage bondsArbitrage bondsMunicipality issued bonds issued intended to gain an interest rate advantage by refunding a higher-rate bond in ahead of their call date. Lower-rate refunding issue proceeds are invested in Treasuries until the first call date of the higher-rate issue. Convertible ArbitrageConvertible ArbitrageIn 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. Multiple ArbitrageMultiple ArbitrageIn the context of hedge funds, a style of management where by the fund employs more than one arbitrage strategy. Portfolio manager opportunistically allocates capital among the various strategies in order to create the best risk/reward profile for the overall fund. Common strategies include merger arbitrage, convertible arbitrage, fixed income arbitrage, long/short equities pairs trading, and volatility arbitrage. In the context of equity and private equity investment, this refers to an investment in a firm where by standard multiples (earnings/price, book/price) indicate the price is far cheaper than industry averages. ArbitrageArbitrageA combination of transactions designed to profit from an existing discrepancy among prices, exchange rates, and/or interest rates on different markets without risk of these changing. Simplest is simultaneous purchase and sale of the same thing in different markets, but more complex forms include triangular arbitrage and covered interest arbitrage. Risk controlled arbitrageRisk controlled arbitrageA self-funding, self-hedged series of transactions that generally use mortgage securities (MBS) as the primary assets. Further SuggestionsRiskless arbitrageSpecial arbitrage account Arbitrageur arbitrage Locational arbitrage One-way arbitrage International arbitrage Arbitrage Trading Program (ATP) arbitrageur Index arbitrage Reversal Arbitrage Discount Arbitrage conversion arbitrage Arbitrage free option pricing models Triangular arbitrage Merger Arbitrage Structured arbitrage transaction Tax arbitrage Triangular arbitrage Currency arbitrage |
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