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Convertible Bond Arbitrage desk managers closely monitor their book delta exposure and dynamically hedge the risk by shorting the related stocks.
(1) What is the major reason why the Convertible Bond Arbitrage strategy generate profits (i.e. what is the main source of alpha)?
(2) Explain two scenarios when this strategy loses money.
(3) After Tesla stock price tripled in January 2020, Financial Times (8 Feb 2020) news article said "The price was pushed up partly by convertible bonds arbitrage investors who covered their short positions along with stock price spike." Write down whether you agree or not and why?
Explain the flotation costs were $1.50 a share and the issue will be retired in 20 years at its $30 par value. What is the cost of this preferred issue?
What is the most critical merger or acquisition that has contributed to Caterpillar's performance and success in achieving organizational goals?
which of the following items are classified as assets on a typical balance sheet?a. depreciation.c. cash.b. ceo
When the interest rate is zero which of the following is true for a delta-neutral portfolio with a positive gamma? Theta is zero As gamma increases theta becomes more negative
If the stock is presently trading at $15 and you believe that a required rate return for this type of company is 14%, based on your estimated price
Given ABC's next year EBIT of $945,000 and depreciation of $105,000, its capital expenditure will be $210,000. What is the free cash flow for the firm (FCFF)?
Describe the shape of the yield curve if investors think that short-term interest rates are likely to increase in the future. Why does the yield curve have this shape?
Provide the Web link for the video clip.- What do you think is the main point of this video clip?- How might you change your process of investing in mutual funds as a result of watching this video clip?
An oil company purchased an option on land in Alaska. Preliminary geologic studies assigned the following prior probabilities.
Assume a hedge fund provides that the management fees are 1 percent of the total assets plus 20 percent of the profits yearly.
How much must Amanda deposit today if she wants to pay herself at the beginning of each month?
Based on these values, what is the company's days of payables outstanding (DPO)? Round to two decimal places (Ex. 0.00).
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