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:
“I, who travel most often for my pleasure, do not direct myself so badly. If it looks ugly on the right, I take the left; if I find myself unfit to ride my horse, I stop.... Have I left something unseen behind me? I go back; it is still on my road. I trace no fixed line, either straight or crooked.”
—Michel de Montaigne (1533–1592)
“There are few sorrows, however poignant, in which a good income is of no avail.”
—Logan Pearsall Smith (1865–1946)