Hedge fund Raritan Item set

CFA Level III Alternative Investments
#1

Raritan Q 3
Raritan Q 31075×373 46 KB

Q 4 Based on the data in Exhibit 1, what strategy is the Orion portfolio manager most likely implementing?

  1. Taking advantage of option mispricing
  2. Profiting from extreme market volatility
  3. Going long a put on the equity net of hedging

1 is correct - I do not understand.

#2

did you get an answer about this?

#3

By going long the convertible bond he’s going long the call option on the convertible. He’d go long convertible bond only if it’s trading at a lower rate than the stock. Because he thinks the stock is overpriced, he went long the put on the stock. These 2 positions together create a convertible bond arbitrage. Hope this helps.

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