Relative Value Hedge Strategy

Relative Value Hedge Strategy

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Relative Value Hedge Strategy

Relative Value Hedge Strategy definition:  Relative value is a type of arbitrage hedge strategy attempting to profit from pricing differences, but the risk is not completely hedged.  Prices can move on either side of the transaction and negatively impact performance. An example of relative value is buying a convertible bond and selling short the stock of the same company. If the stock price moves up, the investor still receives income from the bond. If the stock price moves down, the investor benefits from selling short.

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