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All About Hedge Funds, Fully Revised Second Edition, 2nd Edition by Ezra Zask

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CHAPTER 18Relative Value Strategies

Relative value hedge funds seek to profit by exploiting irregularities or discrepancies in the pricing of stocks, bonds, currencies, or interest rates, as well as derivatives. The term relative value refers to the fact that these strategies look to take advantage of the price relationship between two securities, rather than making bets on single instruments or markets.

RELATIVE VALUE AND ARBITRAGE

While relative value have some structural similarities to arbitrage transactions, and the two terms are often used interchangeably, there are some key differences. Both strategies take advantage of a price difference between two securities. However, relative value strategies look for a convergence of the price of ...

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