An investment manager noticed a large discrepancy buyout issued at the price of two nearly identical bonds in connection with a large leveraged. The manager must find out whether the instruments are undervalued relative to each other, and if so, how to capture arbitrage profits from the temporary anomaly. The case introduces students to a variety of instruments ranging from simple stripes own PIK Notes. Encourages students to “arbitrage” positions and develop u … Read more »

An investment manager noticed a large discrepancy buyout issued at the price of two nearly identical bonds in connection with a large leveraged. The manager must find out whether the instruments are undervalued relative to each other, and if so, how to capture arbitrage profits from the temporary anomaly. The case introduces students to a variety of instruments ranging from simple stripes own PIK Notes. Students being encouraged to develop and understand the extent to which these positions are risk “arbitrage” positions.
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from
Peter Tufano
Source: Harvard Business School
10 pages.
Publication Date: Jun 18, 1992. Prod #: 292129-PDF-ENG
RJR Nabisco Holdings Capital Corp. – 1991 HBR case solution

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