Fixed-income arbitrage is an investment strategy generally associated with hedge funds, which consists of the discovery and exploitation of inefficiencies in the pricing of bonds, i.e. instruments from either public or private issuers, yielding a contractually fixed stream of income.
Most arbitrageurs who employ this strategy trade globally.
In pursuit of their goal of both steady returns and low volatility, the arbitrageurs can focus upon interest rate swaps, US non-US government bond arbitrage, see US Treasury security, forward yield curves, and/or mortgage-backed securities.
The practice of fixed-income arbitrage in general has been compared to "picking up nickels in front of a steamroller".
Famous quotes containing the words fixed and/or income:
“Montesquieu well knew, and justly admired, the happy constitution of this country [Great Britain], where fixed and known laws equally restrain monarchy from tyranny and liberty from licentiousness.”
—Philip Dormer Stanhope, 4th Earl Chesterfield (1694–1773)
“You boast of spending a tenth part of your income in charity; maybe you should spend the nine tenths so, and done with it.”
—Henry David Thoreau (1817–1862)