Podcast
Questions and Answers
What is the primary focus of event-driven strategies in alternative strategy funds?
What is the primary focus of event-driven strategies in alternative strategy funds?
Which of the following strategies falls under directional strategies?
Which of the following strategies falls under directional strategies?
What characterizes relative value strategies compared to event-driven strategies?
What characterizes relative value strategies compared to event-driven strategies?
What type of exposure do alternative strategy funds using directional strategies typically have?
What type of exposure do alternative strategy funds using directional strategies typically have?
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Which of the following strategies is NOT a form of relative value strategy?
Which of the following strategies is NOT a form of relative value strategy?
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What was the profit per share for the long position in the convertible bond as of October 30, 2017?
What was the profit per share for the long position in the convertible bond as of October 30, 2017?
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Which fixed-income arbitrage strategy primarily focuses on price anomalies between related interest rate securities?
Which fixed-income arbitrage strategy primarily focuses on price anomalies between related interest rate securities?
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What factor is commonly utilized in fixed-income arbitrage to enhance returns due to small price anomalies?
What factor is commonly utilized in fixed-income arbitrage to enhance returns due to small price anomalies?
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What was the total market value of the short position in the convertible bond on October 30, 2017?
What was the total market value of the short position in the convertible bond on October 30, 2017?
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Which of the following is NOT listed as a typical component of fixed-income arbitrage strategies?
Which of the following is NOT listed as a typical component of fixed-income arbitrage strategies?
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What yield spread did James determine as the threshold for a potential trade?
What yield spread did James determine as the threshold for a potential trade?
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On which date did James execute the trade reversal?
On which date did James execute the trade reversal?
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What was the initial spread when James shorted the BoC bond?
What was the initial spread when James shorted the BoC bond?
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Which market action did James take after the target yield spread was achieved?
Which market action did James take after the target yield spread was achieved?
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What problem does the term 'tighten' refer to in the context of James' trading strategy?
What problem does the term 'tighten' refer to in the context of James' trading strategy?
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What is the primary focus of a yield spread arbitrage strategy?
What is the primary focus of a yield spread arbitrage strategy?
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If a manager believes the yield curve will flatten, what action are they likely to take?
If a manager believes the yield curve will flatten, what action are they likely to take?
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Which of the following is NOT true regarding the yield spread arbitrage strategy?
Which of the following is NOT true regarding the yield spread arbitrage strategy?
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What would be the expected outcome if a manager successfully forecasts the yield curve's shape?
What would be the expected outcome if a manager successfully forecasts the yield curve's shape?
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What is the general effect of liquidity on implementing the yield spread arbitrage strategy?
What is the general effect of liquidity on implementing the yield spread arbitrage strategy?
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Study Notes
Alternative Investments: Strategies and Performance
- Alternative investment strategies are categorized as relative value, event-driven, and directional.
- Relative value strategies try to profit by exploiting inefficiencies in the pricing of related stocks, bonds, or derivatives.
- Event-driven strategies profit from unique corporate structure events like mergers, acquisitions, stock splits, and buybacks.
- Directional strategies bet on anticipated movements in market prices of equities, debt, and commodities.
- Equity market-neutral strategies create long and short matched equity portfolios.
- Convertible arbitrage strategies identify and exploit mispricing between convertible securities.
- Fixed-income arbitrage strategies profit from price anomalies related to interest rate securities.
- Credit spread arbitrage is a strategy that involves exploiting the difference between the yields of risky and safe bonds.
- Yield spread arbitrage entails using variations in yield curves of sovereign bonds.
- Merger strategies, also known as risk arbitrage, involve taking long and short positions on stocks of companies in pending mergers or acquisitions.
- High-yield bond strategies invest in below-investment-grade or junk bonds.
- Distressed security strategies aim to profit during a company's bankruptcy or reorganization.
- Long/short equity strategies try to exploit overall market outlook by taking long or short positions concurrently.
- Global macro strategies bet on large-scale economic shifts that affect various asset classes.
- Emerging markets strategies invest in developing nations' equities and debt securities.
- Dedicated short bias strategies maintain a net short position in the market.
- Managed futures strategies use futures contracts.
- Multi strategy funds mix various strategies.
Learning Objectives
- Explain the workings of various alternative investment strategies.
- Identify strategies frequently used in alternative mutual funds.
- Discuss risk and return measures for alternative strategy funds.
- Discuss the benchmarking of alternative investment performance.
- Describe the due diligence process for alternative strategy fund investments.
- Determine suitable investor groups for liquid alternatives.
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Description
Test your knowledge on alternative investment strategies, focusing on event-driven, directional, and relative value strategies. This quiz covers various aspects such as fixed-income arbitrage, profit calculations, and market value assessments in the context of alternative strategy funds.
