Convertible Arbitrage: Insights and Techniques for Successful Hedging

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Summary: Well-Written Summary of the State of the Art in Convert Arb
Review: Addressing arbitrage opportunities of both convertible bonds and convertible preferred issues, this text also describes the spectrum use of other derivative instruments for both arbitrage and hedging purposes. Of note, capital structure arbitrage --a hot topic, currently-- is also briefly discussed.

The book serves as a worthwhile summary of all that is currently feasible in this arena. Additionally, many techniques are sufficiently described so as to be made immediatly applicable. As expected from a book of relatively short length, some of the techniques are not drawn out in sufficient detail. The capital structure section, for example, is addressed in only a few pages.

Given the considerable number of tips and insights offered by the author, this book is worth reading despite the lack of detail in some sections.

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Summary: A must for portfolio managers - invaluable information
Review: Convertible arbitrage is an alternative investment form that is ever-increasing in popularity. This book teaches both portfolio managers and fund of funds analysts everything they need to know about convertible bonds and includes a thorough background, a description of the various techniques, and valuation models. Illustrates points with informative graphs, tables, and appendices. An excellent resource tool.

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Summary: Dont buy it if you are not in the trade or profession
Review: I am not saying this is not a good book. In fact, this is by far the best I had come across on Convertible Arbitrage. It's so informative and well written that it should be a handbook for hedge fund professionals or finance professors. However, it's far beyond the comprehension of the investment public who would surely be confused by the vast amount of greek alphabets, financial equations and graphs. Of course, for those affluent readers (time- and money-wise) who want to learn, say, Bearish Tilt Gamma Convertible Hedge, Vega Hedge thru Volatility Swap etc. despite the technicalities and scale issues facing individual investors, it's definitely not a bad bet.



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Summary: Calamos provides perspective and mechanics
Review: I managed a convertible arbitrage portfolio for over 3 years from 1998-2002. When I began managing, the information found in this one book, had to be gathered from many different resources, if it was available at all. I wish this had been available when I first began. This book exposed me to techniques that I have not used before because of my investment mandate. Now I have them in my toolbox if I decide to hunt extra "alpha" for my portfolio.

Some of the techniques are only applicable by arbitrageurs that are in foreign markets. Even these are creative and inspire great avenues for further thought. It was while studying these that the thought occurred to me that the book might not be useable by the individual investor unless they are highly unique.

There are elements of this book that have the air of "promotion" to it. The first chapter cites the advantages of this technique in concert with other management styles. The returns and other statistics span from publication date back to 1995. 1994 was a profoundly difficult year for convertible arb managers and could possibly weakened Calamos' assertions (to be fair he acknowledges as much at the end of the book). Convertible arbitrage will have difficult comparisons when it operates in an environment of low volatility and rising rates unless all risk (and return) are hedged away.


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Summary: Convertible Arbitrage: Insights and Techniques for Successfu
Review: Investment professionals familiar with convertible arbitrage techniques recognize the strategy as a rock-solid tool for generating significant returns regardless of market movements. It's no surprise, then, that amidst the backdrop of market volatility and investor uncertainty, the field of convertible arbitrage keeps growing. Since 1993, the convertible arbitrage market has grown at an astounding 45ompound annual growth rate through the first half of 2002 to $24 billion.* In Convertible Arbitrage: Insights and Techniques for Successful Hedging, renowned investment expert Nick P. Calamos shows you ways to make the most of convertible arbitrage, explaining how to boost returns while decreasing risk-no matter what the market is doing. The practice of convertible arbitrage takes advantage of the unique hybrid nature of convertible securities, which combine both fixed-income and equity characteristics. It typically involves matching a long position in convertible securities-usually convertible bonds-with a short position of corresponding stock. The bond pays interest and guarantees a yield upon maturity-but you also can participate in the movement of the underlying stock because a convertible bond's option component makes it readily convertible into stock. Convertible arbitrage thus allows investors to create positions that achieve either market-neutral returns or that have a bias towards a security's future price, offering tools to both the defensive and aggressive investor. This not-to-be-missed guide gives you: A top-to-bottom overview of convertible arbitrage-its history, how it works, and why it is especially useful in a volatile market In-depth coverage of convertible valuation models and the "greeks," the statistical qualifications of convertible functions Reasons why the credit and business valuation of a convertible can make or break your hedge position A thorough review of convertible arbitrage techniques-from delta hedges and convertible option hedge techniques to swaps and nontraditional hedges An insider's guide to portfolio risk management, including tips on portfolio evaluation, risk analysis, and optimization The array of convertible securities available-and the ever-shifting financial engineering behind them-demands a practical working knowledge of convertible arbitrage hedging techniques. Not only does Convertible Arbitrage put those techniques at your fingertips, it also helps you use those techniques to prepare for-and profit from-new twists in convertible terms, types of securities, or derivative hedge products. *Tremont Advisers, Inc. "The Calamos Convertible Fund offers the Holy Grail in investing-a long-term return superior to the index with less volatility." -William Harding, Analyst Morningstar Investment Services
Minimize risk and maximize profits with convertible arbitrage. Convertible arbitrage involves purchasing a portfolio of convertible securities generally convertible bonds and hedging a portion of the equity risk by selling short the underlying common stock.

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Summary: Derivatives are taking center stage!
Review: The strategies that hedge funds are using now will be in the hands of ordinary investors within the next three weeks. One such strategy is the convertible bond. This is a derivative instrument that cannot be ignored. Fixed income until YOU the investor decide to switch.

How important is this. Mr.Calamos not only shows how relevant it is for today's investor he makes sure that you know the necessary tips and tricks to outwit Wall Street at their own game. As investors wisen up to the need to retain their short term gains instruments such as convertible bonds, warrants, options, futures and many other derivative style investments will dominate the average investors portfolio.

Another two great books along this vein are "Futures For Small Speculators" and "Single Stock Futures For Small Speculators". As the author of both books and a praticing financial planner I field calls constantly from everyday investors that are simply tired of the same old "buy and hold" strategies that don't work or give up to much value in the short run.

Buy convertible arbitrage you won't be disappointed.

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Summary: First True Practical Guide to Capital Structure Arbitrage
Review: This book joins a number of 'hot' topic based books on convertible arb but makes itself stand out by being the first to truly discuss the details of the arbitrages, how to trade and hedge them and how to identify them efficiently.
Further credit (excuse the pun) should be given for extension into the CDS market and the use of more advanced credit hedging techniques.
A must read for any academic interested in studying the fixed income arbitrage markets and a useful reference for any practitioner who thinks he knows what is involved in running an arb book.

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Summary: This is one of the best on hedge fund strategies.
Review: This is by far one of the best books on hedge fund strategies. It's very practical, but also provides enough technical details. Most other books on hedge funds just state some basic facts that everybody knows. This book, however, provides enough details on one single strategy, convertible arb. I would highly recommend this book to any serious Quant who wants to know more about convertible arb.