NO.PZ2023010407000008
问题如下：
Yankel Stein is the chief investment officer of a large charitable
foundation based in the United States. Although the foundation has significant
exposure to alternative investments and hedge funds, Stein proposes to increase
the foundation’s exposure to relative value hedge fund strategies. As part of
Stein’s due diligence on a hedge fund engaging in convertible bond arbitrage,
Stein asks his investment analyst to summarize different risks associated with
the strategy.
Describe how each of the following
circumstances can create concerns for Stein’s proposed hedge fund strategy: i.
Short selling ii. Credit issues iii. Time decay of call option iv.
Extreme market volatility
选项：
解释：
i. Short selling
short squzee might happen when the stock price raises. the investors have to purchase the stock at a higher price which they think the stock price should decrease.
ii. Credit issues
as the convertible bond is a bond, the credit risk is embeded in the bond. when the default happen, the invester will suffer a loss due to the decreasing price of the bond.
iii. Time decay of call option
the value of the call option will decrease as the time passes. so the price gap between the convertible bond and the stock will be narrower.
iv. Extreme market volatility
extreme market volatility will influence the price of the convertivle bond and the stock. it might make the hedge fund strategy ineffective.
