bboo

CFAI agrees with Schweser. Look under Distressed Debt Arbitrage in the reading on Alternative Investments.

Also since credit holders are paid before equity holders, the value of the credit should go up before any improvement in the share price.



Edited 1 time(s). Last edit at Sunday, May 24, 2009 at 12:14PM by abacus.

Unforseen

would be interesting to see how this trade would have performed on any of the casino or bank stocks in last 3 months!! (short equity, long debt would get fked!!!)

Though, I suppose though by definition, those are not truly "distressed" bc no default actually occurred..... Or perhaps more likely the text book was written by someone with no actual experience.