how in convertibile arbitrage, widening of credit spread will affect the strategy, like what would be the best answer in AM session. like if credit spread rises, yield will rise therefore price of our bond will fall, but conversion ratio is already fixed, so unable to articulate, what and how the answer should be written?
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Impact of Widening Credit Spreads:
Analysis of the Situation:
Considerations for the Strategy:
Conclusion:
Convertible arbitrage strategies are sensitive to changes in credit spreads, affecting the bond’s price and, consequently, the overall performance of the strategy. Successful navigation through widening credit spreads requires a comprehensive understanding of the fixed conversion ratio and diligent risk management practices.