Podcast
Questions and Answers
What is the initial yield spread at which James decided to initiate the trade?
What is the initial yield spread at which James decided to initiate the trade?
What was the total number of RY bonds purchased during the trade initiation?
What was the total number of RY bonds purchased during the trade initiation?
What was the total profit achieved by James from the round-trip trade?
What was the total profit achieved by James from the round-trip trade?
What action did James take when the yield spread tightened to 70 bps or less?
What action did James take when the yield spread tightened to 70 bps or less?
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What is the annualized rate of return (RoR) achieved by James on his initial investment?
What is the annualized rate of return (RoR) achieved by James on his initial investment?
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What is a key characteristic of relative value strategies?
What is a key characteristic of relative value strategies?
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Which of the following strategies is likely to involve a focus on corporate events?
Which of the following strategies is likely to involve a focus on corporate events?
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What type of strategy is characterized by low expected return and risk compared to other alternative strategies?
What type of strategy is characterized by low expected return and risk compared to other alternative strategies?
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Identify an alternative strategy that is most aligned with market direction.
Identify an alternative strategy that is most aligned with market direction.
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Which alternative investment strategy typically carries higher risk and expected return?
Which alternative investment strategy typically carries higher risk and expected return?
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In which type of strategy do managers attempt to derive profits from temporary price dislocations?
In which type of strategy do managers attempt to derive profits from temporary price dislocations?
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What is a feature often associated with distressed security strategy?
What is a feature often associated with distressed security strategy?
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Which of the following is not one of the general categories of alternative investment strategies?
Which of the following is not one of the general categories of alternative investment strategies?
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What is the primary reason that equity risk is managed in merger arbitrage?
What is the primary reason that equity risk is managed in merger arbitrage?
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When a merger deal is considered dilutive for the acquiring firm?
When a merger deal is considered dilutive for the acquiring firm?
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If a risk arbitrageur is shorting ABC while acquiring shares of XYZ, what does a hedge ratio of 5 indicate?
If a risk arbitrageur is shorting ABC while acquiring shares of XYZ, what does a hedge ratio of 5 indicate?
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What is the annualized return that a risk arbitrage fund typically seeks in the example provided?
What is the annualized return that a risk arbitrage fund typically seeks in the example provided?
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What type of bonds constitute a high-yield bond strategy?
What type of bonds constitute a high-yield bond strategy?
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Which of the following describes the risk profile of high-yield credit securities?
Which of the following describes the risk profile of high-yield credit securities?
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What is the main goal of managers utilizing a high-yield bond strategy?
What is the main goal of managers utilizing a high-yield bond strategy?
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What does it mean when XYZ is trading at a $48 share price when the transaction value is $50?
What does it mean when XYZ is trading at a $48 share price when the transaction value is $50?
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What was the value of the S&P/TSX 60 futures contract when Victor established his long position?
What was the value of the S&P/TSX 60 futures contract when Victor established his long position?
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How many shares of RY did Victor purchase with the proceeds from shorting TD?
How many shares of RY did Victor purchase with the proceeds from shorting TD?
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What was the profit from the round-trip trade conducted by Victor?
What was the profit from the round-trip trade conducted by Victor?
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What was the annualized rate of return (RoR) on Victor's initial investment?
What was the annualized rate of return (RoR) on Victor's initial investment?
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Which event prompted Victor to reverse his trade?
Which event prompted Victor to reverse his trade?
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On what date did Raj achieve the target price spread?
On what date did Raj achieve the target price spread?
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What action did Raj take when initiating the trade?
What action did Raj take when initiating the trade?
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Which statement is true regarding the price spread statistics?
Which statement is true regarding the price spread statistics?
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What does the term 'trade reversal' refer to in this context?
What does the term 'trade reversal' refer to in this context?
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What figure is represented in the price spread graph?
What figure is represented in the price spread graph?
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What is most likely indicated by the values of 18 and 19 in the price spread?
What is most likely indicated by the values of 18 and 19 in the price spread?
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Which event does 'trade initiation' likely signify?
Which event does 'trade initiation' likely signify?
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What might the '1st Std.' in the graph refer to?
What might the '1st Std.' in the graph refer to?
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Which price spread is depicted as the mean price spread?
Which price spread is depicted as the mean price spread?
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What does the data imply about the historical price spread trend?
What does the data imply about the historical price spread trend?
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What distinguishes directional funds from equity market-neutral strategies?
What distinguishes directional funds from equity market-neutral strategies?
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How does a long/short equity strategy seek to perform in a bull market?
How does a long/short equity strategy seek to perform in a bull market?
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What is the expected outcome for effective short selections in a down market using a long/short equity strategy?
What is the expected outcome for effective short selections in a down market using a long/short equity strategy?
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How is net exposure for a long/short equity fund calculated?
How is net exposure for a long/short equity fund calculated?
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What is a key characteristic of the equity market-neutral strategy compared to the equity long/short strategy?
What is a key characteristic of the equity market-neutral strategy compared to the equity long/short strategy?
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What makes an equity long/short fund's portfolio beta different from that of an equity market-neutral strategy?
What makes an equity long/short fund's portfolio beta different from that of an equity market-neutral strategy?
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What is the typical leverage used by long/short equity funds?
What is the typical leverage used by long/short equity funds?
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What distinguishes a fund that uses a long/short equity strategy when compared to a long-only fund?
What distinguishes a fund that uses a long/short equity strategy when compared to a long-only fund?
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Study Notes
Alternative Investments: Strategies and Performance
- This chapter covers alternative investment strategies and performance measurement tools.
- It also discusses comprehensive due diligence and suitability of alternative strategies.
Learning Objectives
- Explain alternative investment strategies (relative value, event-driven, and directional).
- Identify strategies commonly used in alternative mutual funds.
- Discuss risk measures and risk-adjusted returns for alternative strategy investments.
- Describe alternative investment performance benchmarking.
- Detail the due diligence process for alternative strategy fund investments.
- Identify investor groups suitable for liquid alternative investments.
Key Terms
- absolute risk
- convertible arbitrage strategy
- directional strategies
- distressed security strategy
- emerging markets alternative funds
- equity market-neutral strategy
- event-driven strategies
- fixed-income arbitrage strategy
- global macro strategy
- high-yield bond strategy
- kurtosis
- maximum drawdown
- merger strategy
- relative value strategies
- risk arbitrage strategy
- short bias strategy
- long/short equity strategy
- skew
- time to recovery
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Description
Test your knowledge on investment strategies with this quiz centered around James' trading decisions and yield spreads. Answer questions about his bond purchases, profit, and return on investment. Ideal for finance students looking to deepen their understanding of trading concepts.
