Fixed-Income Arbitrage
Definition of 'Fixed-Income Arbitrage'An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income arbitrage strategy, the investor assumes opposing positions in the market to take advantage of small price discrepancies while limiting interest rate risk. |
|
Investopedia explains 'Fixed-Income Arbitrage'Fixed-income arbitrage is primarily used by hedge funds and leading investment banks. The most common fixed-income arbitrage strategy is swap-spread arbitrage. This consists of taking opposing long and short positions in a swap and a Treasury bond. Such strategies provide relatively small returns and, in some cases, huge losses. That's why these strategies are often referred to as "picking up nickels in front of a steamroller"! |
Related Definitions
Articles Of Interest
-
Trading The Odds With Arbitrage
Profiting from arbitrage is not only for market makers - retail traders can find opportunity in risk arbitrage. -
Taking A Look Behind Hedge Funds
Hedge funds can draw returns well above the market average even in a weak economy. Learn about the risks. -
Put-Call Parity And Arbitrage Opportunity
Look at trades that are profitable when the value of corresponding puts and calls diverge. -
Hedge Funds: Higher Returns Or Just High Fees?
Discover the advantages and pitfalls of hedge funds and the questions to ask when choosing one. -
Hedge Funds Hunt For Upside, Regardless Of The Market
Hedge funds seek positive absolute returns, and engage in aggressive strategies to make this happen. -
What is arbitrage?
Arbitrage is basically buying in one market and simultaneously selling in another, profiting from a temporary difference. This is considered riskless profit for the investor/trader. Here is an ... -
How Interest Rates Affect The Housing Market
Understand how rate changes can affect home prices, and learn how you can keep up. -
Break Into Forex In 12 Steps
Learn how to get started in forex trading. -
Choose A Fund With A Winning Manager
We break down the key components of analyzing a fund manager's performance so you can find a winner. -
George Soros: The Philosophy Of An Elite Investor
George Soros spent decades as one of the world's elite investors, and even he didn't always come out on top. But when he did, it was spectacular.
Free Annual Reports