The answer to 18 on page 101 is Issue B which has the largest deviation above the mean (2.4 times the standard deviation). I thought it would be Issue A with the lowest deviation above the mean that could be purchased based on mean-reversion theory. Not sure if I am following the answer.作者: Siddimaula 时间: 2013-4-10 23:48
In the question it states that the manager believes that credit spreads are mean reverting.
The highest potential to revert can be seen from Issue B as its spread has moved far from the mean taking standard deviation into consideration. Standard deviation says 10bps and it has gone till 24bps. Thus most likely to fall back.
