Explanation:

The correct answer is B.

A fixed-income arbitrage strategy is classified as a relative value strategy. Relative value funds seek to profit from a pricing discrepancy between related securities, i.e., mispricing between a convertible bond and its component parts (the underlying bond and the embedded stock option).

Option A is incorrect. A fixed income convertible arbitrage strategy is a market-neutral (zero beta portfolio) strategy.
Option C is incorrect. The fixed income convertible arbitrage strategy involves buying a convertible bond of one issue and simultaneously selling the same issuer's common stock (not another issuer's).
Option D is incorrect. Global macro is a general investment strategy that involves making investment decisions guided by the economic/political outlook of a country.

Q.3506 Which of the following statements correctly describes a fixed income arbitrage hedge fund strategy?

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This strategy seeks beta-positive investment strategies.

This strategy seeks to employ a pricing discrepancy between related securities.

This strategy involves buying a convertible bond of one issuer while selling another issuer's common stock.

This strategy seeks to make investment decisions guided by the economic/political outlook of a country.

Financial Risk Manager Part 1

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Q.3506 Which of the following statements correctly describes a fixed income arbitrage hedge fund strategy?

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