Credit Derivative Strategies: New Thinking on Managing Risk and Return

CHAPTER 1

Eight Relative Value Opportunities

CHRISTOPH KLEIN

 

 

 

This chapter describes credit-relative value trades from the perspective of a multistrategy credit hedge fund. The following chapters will describe all credit instruments in more detail.

A multistrategy framework confers important advantages to a fund. It allows the fund to dynamically exploit a wide range of market situations, integrate new credit instruments as they are developed, and create a diversified portfolio, which is more likely to generate stable and attractive risk-adjusted returns over time.

The model for this discussion is a multistrategy credit hedge fund, which seeks to systematically exploit inefficiencies in credit markets using cash and derivative instruments. ...