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Market-Neutral Investing by Joseph G. Nicholas
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    • Product code: 13773
    • ISBN: 1576600378, ISBN13: 9781576600375, 288 pages, hardback
      Published by Bloomberg Press on 2000 , 1st
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    Rating: 2.8/5 (4 votes cast)

    Description of Market-Neutral Investing

    Achieving ideal returns by diversifying away risk. Managing risk is a weightier issue than ever for professional investors. They're seeking downside protection as they grapple to remain fully invested in a hyper - inflated stock market. Market-neutral investing is one of the hottest strategies for achieving such protection.

    In this groundbreaking book, industry expert Joseph G. Nicholas opens investors up to new thinking on highly effective approaches to return enhancement and risk reduction through investment diversification. Nicholas shows how market-neutral investing techniques hedge exposures - to neutralize the impact of market volatility on investment performance. He demystifies these strategies and explains how to successfully put together a market-neutral portfolio.

    Nicholas shows the reader how to apply these approaches to a variety of investments from equity trades and fixed-income instruments, to convertibles and merger arbitrage. This is the one book that looks at market-neutral strategies head on, assessing strategies that have worked and those that have failed - and explaining why. Clear, insightful, and illustrated with numerous charts and graphs, Market - Neutral Investing is an invaluable guide for professional money managers.

    Up Close and Neutral:

    - The what, when, and why of market-neutral strategies
    - Clear definitions of specific market-neutral approaches
    - Profiles of seven market-neutral strategies, including risks and merits
    - How to build a market-neutral investment portfolio
    Advice and insight from top money managers

    Reviews

    "A text that all potential and current hedge fund investors should read. This publication is sorely needed by the investment community and will help to broaden the number of investors participating in hedge funds."
    - JACK BARRY, President, Beacon Hill Asset Management LLC

    "Market-neutral investing...is the fastest growing segment within the global hedge funds industry. Nicholas offers... valuable insights into eight specific market-neutral strategies that are in growing demand by both institutional and private investors.... this is a milestone publication, which broadens our knowledge and investment horizons - an invaluable reference tool for global portfolio managers, the international investor community, and industry service providers."
    - SOHAIL JAFFER, Chairman, Alternative Investment Management Association (AIMA)

    Contents of Market-Neutral Investing

    1. Investing in Relationships
    What Is Market Neutral?
    Basic Concepts
    Relationship Investing
    Understanding Market-Neutral Approaches

    2. Developments in the Hedge Fund Industry
    Hedge Fund Industry Assets
    Hedge Fund Investors
    Hedge Fund Strategies

    3. Making an Investment in Market-Neutral Strategies
    Linear Analysis of Returns
    Reducing Exposure to Risk
    Market-Neutral and Hedged Strategies
    Convertible Arbitrage
    Fixed-Income Arbitrage
    Mortgage-Backed Securities Arbitrage
    Merger Arbitrage
    Equity Hedge
    Equity Market-Neutral and Statistical Arbitrage
    Relative Value Arbitrage
    Achieving Superior Risk-Adjusted Returns
    Assessing the Risks
    Transparency
    Focusing on the Underlying Strategies

    4. Convertible Arbitrage
    Convertible Bond Valuation
    Statistical Advantage
    Convertible Valuation Components
    Convertible Arbitrage Approaches
    Quantitative Screens
    Kinds of Hedges
    Setting Up a Market-Neutral Hedge
    Setting up a Bullish Hedge
    Setting up a Bearish Hedge
    Risks and Risk Control
    Fundamental Analysis
    Hedge Analysis
    Portfolio Construction
    Liquidity
    Leverage
    Source of Return
    Convertible Bond Market History
    Recent Growth and Developments in Convertible Arbitrage
    Performance in Adverse Market Conditions
    Historical Examples


    5. Fixed-Income Arbitrage
    Fixed-Income Arbitrage Approaches
    Basis Trades
    Asset Swaps
    TED Spreads
    Yield Curve Arbitrage
    Relative Value Trades
    Risks and Risk Control
    Risks
    Measuring and Controlling Interest Rate Risk
    Sources of Return
    Financing
    Repurchase Agreements
    Technology
    Liquidity
    Events
    Manager Skill and Hard Work
    Growth and Recent Developments in Fixed-Income Arbitrage


    6. Mortgage-Backed Securities Arbitrage
    Mortgage-Backed Structures or Sectors
    (Types of MBS Instruments)
    Mortgage-Backed Securities' Evolution
    Pass-Throughs
    Basic Collateralized Mortgage Obligations (CMOs)
    CMO Tranches
    Valuation Methods
    Option-Adjusted Spreads
    Information Systems
    Risks and Risk Control
    Duration
    Effective and Partial Duration
    Parallel and Rotational Shifts of the Yield Curve
    Convexity
    Prepayment Duration
    Leverage
    Pricing
    Source of Return
    Valuation Models
    Leverage
    Liquidity
    Financing
    Hedging Techniques
    Recent Developments in MBS Arbitrage


    7. Merger Arbitrage
    Merger Arbitrage Approaches
    Cash Mergers or Tender Offers
    Stock Swap Mergers
    Stock Swap Mergers with a Collar
    Multiple Bidder Situations
    Leveraged Buyouts and Hostile Takeovers
    Risks
    Event Risk
    Deal Flow
    Liquidity
    Risk Control
    Diversification
    Leverage
    Source of Return
    Growth and Recent Developments in
    Merger Arbitrage
    Deal Flow and Other Factors Affecting Volume
    Stress Period. The Third Quarter of 1998
    Returns


    8. Equity Hedge
    Investment Themes and Fundamental Analysis
    Investment Themes
    Fundamental Analysis
    Equity Hedge Approaches
    Quantitative vs. Qualitative Mix
    Universe of Stocks
    Style
    Liquidity
    Net Market Exposure
    Research
    Leverage
    Risks and Risk Control
    Stock-Picking Risk
    Market Risk
    Universe of Stocks
    Diversification
    Sell Disciplines
    Leverage
    Source of Return
    Recent Growth and Developments in Equity Hedge Investing


    9. Equity Market - Neutral and Statistical Arbitrage
    Equity Market - Neutral Approaches
    Initial Screen: Universe of Investable Stocks
    Stock Selection
    Mean Reversion - Based Approaches
    Risks and Risk Control
    Portfolio Construction and Optimization
    Manager Styles - Putting It All Together
    Source of Return
    Recent Growth and Developments in Equity Market-Neutral Investing


    10. Relative Value Arbitrage
    Relative Value Arbitrage Approaches
    Convertible Arbitrage
    Merger Arbitrage
    Equity Statistical Arbitrage
    Pairs Trading
    Fixed-Income Arbitrage
    Options and Warrants Trading
    Capital Structure Arbitrage
    Regulation D (Structured Discount Convertible) Arbitrage
    Risks and Risk Control
    Strategy Mix
    Strategy Weightings
    Source of Return
    Growth and Recent Developments in Relative Value Arbitrage

    Afterword
    Glossary
    Index


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    Other books by Joseph G. Nicholas


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