Understanding Relative Value Strategies in Hedge Funds

Very Easy Hedge Fund Strategies Relative Value

In the realm of hedge fund strategies, relative value strategies are designed to exploit price discrepancies between related financial instruments. These strategies aim to generate returns from the movement of these related instruments toward their expected values.

Which of the following best describes a typical example of a relative value strategy used by hedge funds?

Investing in distressed securities with the hope of capitalizing on a recovery.

Arbitraging price differences between convertible bonds and the underlying stock.

Buying and selling the same asset class in different markets to profit from spread differences.

Hint

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