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Hedge Fund Strategies (11) – Liquidity-Based Yield Spreads

Liquidity is the ability to sell a security without significantly affecting its price. This is a positive attribute, and all things being equal, traders will pay more for securities with higher liquidity.

http://www.hedgefundwriter.com/2011/12/15/hedge-fund-strategies-11-%e2%80%93-liquidity-based-yield-spreads/#comments

Hedge Fund Strategies (10) – Trading the TED Spread

The difference between the interest rate on three-month Treasury bills versus the three-month London Inter-Bank Offering Rate (LIBOR), is known as the TED spread.

http://www.hedgefundwriter.com/2011/10/02/hedge-fund-strategies-10-%e2%80%93-trading-ted-spread/#comments

Hedge Fund Strategies (9) – Asset Swaps

Let us resume our tour of hedge fund strategies based on different types of fixed income arbitrage. An asset swap is an over-the-counter agreement between two counterparties to exchange fixed-rate interest payments for floating-rate interest payments. The fixed portion is a position in a fixed-rate loan, such as government or corporate bonds. The floating-rate portion [...]

http://www.hedgefundwriter.com/2011/08/19/hedge-fund-strategies-9-%e2%80%93-asset-swaps/#comments

Hedge Fund Strategies (8) – Basis Trading

Basis trading is a form of fixed-income arbitrage that seeks to benefit from a change in the spread between a spot bond price and an adjusted futures price.

http://www.hedgefundwriter.com/2011/06/05/hedge-fund-strategies-8-basis-trading/#comments

Hedge Fund Strategies (7) – Yield-Curve Arbitrage and Butterflies

Our review of hedge fund trading strategies continues with a discussion of yield-curve arbitrage (YCA), a form of fixed income arbitrage. I have previously written about the yield curve, convexity, and duration.

http://www.hedgefundwriter.com/2011/05/22/hedge-fund-strategies-7-%e2%80%93-yield-curve-arbitrage-butterflies/#comments

Hedge Fund Strategies (6) – Fixed Income Arbitrage and Spread Trades

Fixed Income Arbitrage (FIA) is the name given to a family of trading strategies that, to various extents, use spread trades on debt instruments to take advantage of pricing inefficiencies independent of overall market direction. A spread trade is the simultaneous purchase and shorting of related securities (and their derivatives) in the hope of profiting [...]

http://www.hedgefundwriter.com/2011/05/16/hedge-fund-strategies-6-%e2%80%93-fixed-income-arbitrage-spread-trades/#comments

Yield Curve – Theories

Recall that yield curves (also known as the term structure of interest rates) plot debt maturities (the independent variable) against interest rates (the dependent variable).

http://www.hedgefundwriter.com/2011/05/11/yield-curve-%e2%80%93-theories/#comments

Yield Curve – Structure

Yield curves (also known as the term structure of interest rates) plot debt maturities (the independent variable) against interest rates (the dependent variable).

http://www.hedgefundwriter.com/2011/05/02/yield-curve-structure/#comments

Hedge Fund Strategies (Part 5) – Hedged Equity Short Selling

Shorting a stock means selling shares you do not own in the hopes of benefiting from a decline in the price of the shares. The seller borrows shares, usually from a broker, and delivers them to a buyer in return for cash.

http://www.hedgefundwriter.com/2011/04/24/hedge-fund-strategies-part-5-%e2%80%93-hedged-equity-short-selling/#comments

Hedge Fund Strategies (Part 4) –Hedged Equity Market Neutral

Traders take positions in pairs of similar stocks, longing the “undervalued” one and shorting the “overvalued one”, thereby placing a bet on the ultimate outperformance of the long position.

http://www.hedgefundwriter.com/2011/04/07/hedge-fund-strategies-part-4-%e2%80%93hedged-equity-market-neutral/#comments