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:
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—E.T.A.W. (Ernst Theodor Amadeus Wilhelm)
“The question for the country now is how to secure a more equal distribution of property among the people. There can be no republican institutions with vast masses of property permanently in a few hands, and large masses of voters without property.... Let no man get by inheritance, or by will, more than will produce at four per cent interest an income ... of fifteen thousand dollars] per year, or an estate of five hundred thousand dollars.”
—Rutherford Birchard Hayes (1822–1893)