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Relative Value
see also: market neutral investing
          
       

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  1. Definition
  2. Examples, Types, or Variations
  3. Formula
  4. Related Terms
  5. As Used in the Hedge Fund World
  6. Applications
  7. Misused & Abused
  8. Additional Sources of Information
    1. Books
    2. News
    3. Scholarly Papers
       
 

1.
 

Definition
 
 

Relative value is the attractiveness measured in terms of risk, liquidity, and return of one instrument relative to another, or for a given instrument, of one maturity relative to another. The term is used in economics, business or investment.

Other Resources:

  • LJH Global Investments: Relative value funds encompass a range of funds that invest in bonds and/or equity, but are not dependent on the direction of market movements. More…
     
  • Finance Encyclopedia: The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to another, or, for a given instrument, of one maturity relative to another. More…
     
  • AIG Global Investment Group: The relative value strategy involves taking simultaneous long and short positions in closely related markets. More…
     
  • Gutmann Private Bankers: The relative-value strategy evolved from the classical arbitrage strategy, which is no longer widely applicable in its original form owing to increasing market integration and globalization. More…
     

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2.
 

Examples, Types, or Variations
 
  Relative Value (or Market Neutral) strategies consist of:
  • Equity Market Neutral
     
  • Event Driven
     
    • Distressed Securities
    • Merger Arbitrage
       
  • Market Neutral Arbitrage
     
    • Convertible Arbitrage
    • Fixed Income Arbitrage
    • Statistical Arbitrage
       

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3.
 

Formula
 
 

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4.
 

Related Terms
 
 

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5.
 

As Used in the Hedge Fund World
 
 

Some Hedge funds engage principally in arbitrage strategies in the global equity and corporate debt securities markets taking advantage of mispricings between two related and correlated securities. Typical arbitrage strategies include: fixed income arbitrage, convertible bond arbitrage, mortgaged-backed arbitrage and derivative arbitrage.

Other Resources:

  • Financial Policy Forum: Relative-value hedge funds seek profit by exploiting irregularities or discrepancies in the pricing of stocks, bonds or derivatives. More…


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6.
 

Applications
 
  The goal of Relative Value funds is to take advantage of price differentials between related financial instruments such as stocks and bonds.
 

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7.
 

Misused & Abused
 
 



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8.
 

Additional Sources of Information
 
 
  1. Books
  2. News
  3. Scholarly Papers

 

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News Books Scholarly Definitions

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