Relative Value Strategies
Free CAIA Level I lesson in Hedge Funds. 31 min read, ~4,666 words.
Relative value bets on spread convergence between related securities, market-neutral by construction, not by happy accident. Convertible arbitrage buys the convert and shorts the underlying to delta-hedge, earning cheap embedded vol (the complexity premium), coupon, short rebate, and gamma scalping. Issuers keep supplying underpriced converts for four reasons: agent underestimation...
Read the full lesson, free →
Worked examples and practice. Free with a free account, no card.
What this lesson covers
- Content
- Return Drivers of Convertible Bond Arbitrage
- Volatility Arbitrage Strategies
- Asset-Backed and Mortgage-Backed Securities Arbitrage
- Relative Value Multistrategy Funds
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- distinguishing
- short selling
- returns allocation
- multistrategy
- research
- indices
- macro overview
- macro
- managed futures
- systematic trading
- trend following
- mf dimensions
- systematic construction
- mf benefits
- mf evidence
- mf fund benefits
- event sources
- activist investing
- activism outcomes
- merger arb
- distressed securities
- event multi special
- rv overview
- convertible arb overview
- convertible arb drivers
- vol arb overview
- vol arb strategies
- fi arb
- rv multistrategy
- equity commonalities
- sources of return
- market anomalies
- anomaly strategies
- equity shorts
- three strategies
Browse all free CAIA Level I lessons or jump into free CAIA Level I practice questions.