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High Yield Related Scholarly Compositions
See also:
High Yield Related
News,
High Yield Related
Books,
or
High Yield Home Page.
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Capital Structure Arbitrage: An
Empirical Investigation Using Stocks and High Yield Bonds
by Manolis Chatiras & Barsendu Mukherjee
Center for International Securities and Derivatives Market
February, 2004
Introduction
Capital structure arbitrage is one of the most recent hedge fund
strategies that is rapidly gaining popularity amonst traders. It
has been gaining in popularity since 2000 and aims to exploit
the pricing inefficienty that exists in the capital structure of
the same firm. For example, one could go long the high yield
bond and short the stock of a company to hedge the equity risk
component of the high yield bond...
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Conditional Performance of Hedge
Funds
by Hossein Kazemi & Thomas Schneeweis
Isenberg School of Management & University of Massachusetts
March, 2003
Abstract
This paper measures the conditional performance of hedge funds
using the stochastic discount factor (SDF) approach. This
approach has been proposed for the performance evaluation of
actively managed portfolios because it imposes fewer
restrictions on the behavior of underlying assets and it enables
one to measure the performance of such portfolios relative to
the performance of dynamic trading strategies involving a set of
primitive assets. Such trading strategies are conditioned on a
set of instruments and nest simple buy and hold strategies as
well...
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A Corporate
Bond Innovation of the 90s: The Clawback Provision in High-Yield
Debt
by Vidhan K. Goyal, Neela Gollapudi, & Joseph P. Ogden
Hong Kong University & University of New York at Buffalo
1997
Abstract
This paper examines a recent financial innovation in corporate
bond contracts, referred to as the clawback provision. A
clawback provision in debt contracts gives the issuer an option
to redeem a specified fraction of the bond issue within a
specified period at a predetermined price and with funds that
must come from a subsequent equity offering. We argue that
issuers use clawback provisions to mitigate the wealth losses
that would otherwise occur when new equity is offered...
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Defaults & Returns on High Yield
Bonds: Analysis Through 2001
by Edward I. Altman and Pablo Arman
Abstract
The year 2001 was remarkable on many fronts. For the high yield
market, it was a year of crushing record numbers of defaults and
distressed exchanges, combined with predictable low recovery
rates. Despite these fundamental problems and the “flight to
quality” following the terrorist attacks in September, the high
yield market displayed impressive resiliency...
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The Default Risk of High-Yield
Bonds
by Cynthia G. McDonald & Linda M. Van De Gucht
University of Missouri at Columbia & Katholieke Universiteit
Leuven
July, 1996
Abstract
This paper investigates the default behavior of original issue
rated non-convertible high-yield bonds. Previous studies of
high-yield bond defaults provide evidence of an aging effect:
the longer bonds have been outstanding, the greater the default
probability. However, Blume, Keim and Patel (1991) assert that
this aging relationship reflects changing economic conditions...
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Empirical Characteristics of
Dynamic Trading Strategies: The Case of Hedge Funds
by William Fung & David A. Hsieh
Paradigm, LDC & Duke University
Abstract
This article presents some new results on an un-explored dataset
on hedge fund performance. The results indicate that hedge funds
follow strategies that are dramatically different from mutual
funds, and support the claim that these strategies are highly
dynamic. The article finds five dominant investment styles in
hedge funds, which when added to Sharpe’s (1992) asset class
factor model can provide an integrated frame-work for style
analysis of both buy-and-hold and
dynamic trading strategies...
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Hedge Fund Benchmarks:
Information Content and Biases
by William Fung and David A. Hsieh
We discuss the information content and potential
measurement biases in hedge fund benchmarks. Hedge-fund indexes
built from databases of individual hedge funds inherit the
measurement biases in the databases. In addition, broad-based
indexes mask the diversity of individual hedge-fund return
characteristics...
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High-Yield ('Junk') Bonds As
Investments and As Financial Tools
by William A. Klein
University of California, Los Angeles - School of Law
Abstract
High-yield ("junk") bonds acquired a bad name when used in the
late 1980s to finance takeover transactions that left target
corporations with an excessive risk of insolvency. The tarnished
reputation of these instruments is largely unde- served.
High-yield bonds have proved useful, as an alterna- tive to bank
and other forms of financing, for "emerging" firms...
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How to Price Hedge Funds: From
Two-to-Four-Moment CAPM
by Angelo Ranaldo & Laurent Favre
UBS Global Asset Management & UBS Wealth Management
October 2003
Abstract
The CAPM model has serious difficulties to explain the past
superior performance of most hedge funds. The purpose of this
research is to analyze how to price hedge funds. We compare the
traditional CAPM based on the Markowitz mean-variance criterion
with extensions of the CAPM that account for coskewness and
cokurtosis. The key result is that the risk-return
characteristics of hedge funds can differ widely. The use of a
unique pricing model may be misleading. The beta is an
exhaustive risk measure only for some hedge funds. Other hedge
funds have significant coskewness and cokurtosis. The lack of
consideration of higher moments may lead to an insufficient
compensation for the investment risk.
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Institutional Investors, Unstable
Financial Markets, & Monetary Policy
by E. Philip Davis
European Monetary Institute
1995
Abstract
This article focuses on the issues which may arise for central
banks in the pursuit of monetary stability in the context of
asset price volatility, and the impact thereon of growth of
institutional investors such as pension funds, life insurers and
mutual funds. The evolving pattern of volatility is considered
to have entailed a major shift in the stability of central
banks’ environment and poses difficulties for monetary policy.
The article first seeks to outline the reasons why institutions
may destabilise financial markets, drawing on the economic
literature and the outcome of recent discussions of the author
with major institutional players, and supplemented by
indications of their growing size and activity...
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Real Interest Rates and the
Default Rate on High-Yield Bonds
by Martin Fridson, Christopher Garman, & Sheng Wu
Merrill Lynch & Co.
Fall, 1997
Abstract
Determinants of the aggregate default rate on high-yield bonds
have been of interest at least since 1990 - 1991, when the
proportion of defaulting issued reached effectively its highest
level since the Great Depression. With recovery by the
mid-19902, and a new record volume of issuance in 1993, analysts
have wondered whether another wave of financial failures will
follow. This research shows that nominal interest rates are not
highly correlated with aggregate default rates on high-yield
bonds...
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Back to Scholarly Compositions
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Yield Related Books,
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| HEDGE FUND RISK AND OTHER
DISCLOSURES |
Hedge funds, including fund of funds (“Hedge
Funds”), are unregistered private investment partnerships, funds or
pools that may invest and trade in many different markets,
strategies and instruments (including securities, non-securities and
derivatives) and are NOT subject to the same regulatory requirements
as mutual funds, including mutual fund requirements to provide
certain periodic and standardized pricing and valuation information
to investors. There are substantial risks in investing in Hedge
Funds. Persons interested in investing in Hedge Funds should
carefully note the following:
- Hedge Funds represent speculative investments and involve a
high degree of risk. An investor could lose all or a substantial
portion of his/her investment. Investors must have the financial
ability, sophistication/experience and willingness to bear the
risks of an investment in a Hedge Fund.
- An investment in a Hedge Fund should be discretionary capital
set aside strictly for speculative purposes.
- An investment in a Hedge Fund is not suitable or desirable for
all investors. Only qualified eligible investors may invest in
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- Hedge Fund offering documents are not reviewed or approved by
federal or state regulators
- Hedge Funds may be leveraged (including highly leveraged) and
a Hedge Fund’s performance may be volatile
- An investment in a Hedge Fund may be illiquid and there may be
significant restrictions on transferring interests in a Hedge
Fund. There is no secondary market for an investor’s investment in
a Hedge Fund and none is expected to develop.
- A Hedge Fund may have little or no operating history or
performance and may use hypothetical or pro forma performance
which may not reflect actual trading done by the manager or
advisor and should be reviewed carefully. Investors should not
place undue reliance on hypothetical or pro forma performance.
- A Hedge Fund’s manager or advisor has total trading authority
over the Hedge Fund.
- A Hedge Fund may use a single advisor or employ a single
strategy, which could mean a lack of diversification and higher
risk.
- A Hedge Fund (for example, a fund of funds) and its managers
or advisors may rely on the trading expertise and experience of
third-party managers or advisors, the identity of which may not be
disclosed to investors
- A Hedge Fund may involve a complex tax structure, which should
be reviewed carefully.
- A Hedge Fund may involve structures or strategies that may
cause delays in important tax information being sent to investors.
- A Hedge Fund may provide no transparency regarding its
underlying investments (including sub-funds in a fund of funds
structure) to investors. If this is the case, there will be no way
for an investor to monitor the specific investments made by the
Hedge Fund or, in a fund of funds structure, to know whether the
sub-fund investments are consistent with the Hedge Fund’s
investment strategy or risk levels.
- A Hedge Fund may execute a substantial portion of trades on
foreign exchanges or over-the-counter markets, which could mean
higher risk.
- A Hedge Fund’s fees and expenses-which may be substantial
regardless of any positive return- will offset the Hedge Fund’s
trading profits. In a fund of funds or similar structure, fees are
generally charged at the fund as well as the sub-fund levels;
therefore fees charged investors will be higher that those charged
if the investor invested directly in the sub-fund(s).
- Hedge Funds are not required to provide periodic pricing or
valuation information to investors.
- Hedge Funds and their managers/advisors may be subject to
various conflicts of interest.
The above general
summary is not a complete list of the risks and other important
disclosures involved in investing in Hedge Funds and, with respect
to any particular Hedge Fund, is subject to the more complete and
specific disclosures contained in such Hedge Fund’s respective
offering documents. Before making any investment, an investor should
thoroughly review a Hedge Fund’s offering documents with the
investor’s financial, legal and tax advisor to determine whether an
investment in the Hedge Fund is suitable for the investor in light
of the investor’s investment objectives, financial circumstances and
tax situation.
All performance information is believed
to be net of applicable fees unless otherwise specifically noted. No
representation is made that any fund will or is likely to achieve
its objectives or that any investor will or is likely to achieve
results comparable to those shown or will make any profit at all or
will be able to avoid incurring substantial losses. Past performance
is not necessarily indicative, and is no guarantee, of future
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appropriateness or suitability of an investment, or intended to be
an offer, or the solicitation of any offer, to buy or sell any
security or an endorsement or inducement to invest with any fund or
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delivery of appropriate offering documents to qualified investors.
Before making any investment, you should thoroughly review the
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The information on this Site is as of the date(s) indicated,
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more complete disclosures and terms and conditions contained in a
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or implied, representation or guarantee is made as to the accuracy,
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Any indices and other financial benchmarks
shown are provided for illustrative purposes only, are unmanaged,
reflect reinvestment of income and dividends and do not reflect the
impact of advisory fees. Investors cannot invest directly in an
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substantially fewer securities than are contained in an index.
Indices also may contain securities or types of securities that are
not comparable to those traded by a hedge fund. Therefore, a hedge
fund’s performance may differ substantially from the performance of
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