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This is part of a case series. To extract 'cheap' volatility in Duke Energy convertible bonds, Mark Puntner, a convertible arbitrageur at KBC AIM, purchases the bonds and delta hedges them with a short position in the company's shares. To manage the credit risk of his long convertible bond position, Mark faces a choice of hedging with CDS (credit default swaps), shares of the company or out-of-the-money puts the company's stock. Key to his hedging strategy is an understanding of the observed negative correlation between credit spreads and share prices for Duke Energy.