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Case
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Reference no. 9-211-018
Published by: Harvard Business Publishing
Originally published in: 2010
Version: 20 June 2011
Revision date: 01-Nov-2011
Length: 9 pages
Data source: Generalised experience

Abstract

Investment manager Eliza Baena confronts an apparent convertible bond arbitrage opportunity when she notices a narrowing spread between two Boston Properties (BXP) bonds, one a convertible bond and the other a straight bond, in the wake of the 2008 Lehman bankruptcy. Baena must decide if there is an opportunity, how to structure a trade to exploit it, and how much of her fund's capital to allocate. Case exposition includes descriptions of basic financing arrangements that support arbitrage strategies, such as rehypothecation and margin lending.
Location:
Industry:
Other setting(s):
2008

About

Abstract

Investment manager Eliza Baena confronts an apparent convertible bond arbitrage opportunity when she notices a narrowing spread between two Boston Properties (BXP) bonds, one a convertible bond and the other a straight bond, in the wake of the 2008 Lehman bankruptcy. Baena must decide if there is an opportunity, how to structure a trade to exploit it, and how much of her fund's capital to allocate. Case exposition includes descriptions of basic financing arrangements that support arbitrage strategies, such as rehypothecation and margin lending.

Settings

Location:
Industry:
Other setting(s):
2008

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