Caution over creating special purpose vehicles (SPVs) used for asset swaps is having a negative impact on the already depressed convertible arbitrage market.
Asset swaps are the most effective way to hedge credit risk within a convertible arbitrage strategy, but the presence of this ability depends on financial institutions creating SPVs, something they are now reluctant to do post-Enron.
Dorothy Dewitt, co-manager of GAM's Multi-Arbitrage fund, says: 'Shareholders in those financial institutions
- Brexit novations ‘on hold’ to gain reg relief
- People moves: Bank of America names new Apac chiefs, Wilkinson leaves LGIM, Lloyds loses Coutte, and more
- Mifid data publishers drag feet on Esma guidelines
- Sefs, Libor fallbacks and risk governance in Asia
- Banks hope final FRTB rules will ease NMRF burden