Convertible arbitrage

Discussion in 'Trading' started by NasdaqTrader, May 13, 2003.

  1. I see this term quite often when it comes to certain styles that hedge funds use.What is this exactly and is it profitable?
  2. gms


    That's where I keep my car overnight.

    "A strategy involving the purchase of convertible securities and the subsequent shorting of the corresponding stock. Conversion will offset the short position. The transaction may be profitable if the convertible is priced incorrectly relative to the stock. "
  3. Do these mispricings of convertible securities happen often?Is this something an individual investor can partake in profitably?
  4. sle


    If you know how to price them - there are many opportunities. However, do not forget that these are multi-day high cap strategies. I can send you a literature list if you want to learn more about convertibles/exchangeables.
  5. Here's a book for you to read by a large convert shop out there...Calamos Asset Management:

    You can find it on Amazon:
    Convertible Arbitrage: Insights and Techniques for Successful Hedging

    Lots of the large hedge funds do this. This is the strategy that started Citadel (top 5 hedge fund in the world, here in Chicago)...amazing story.