Key Points:
- Convertible Securities: A Complete Guide to Investment and Corporate Financing Strategies provides comprehensive information on investing in, hedging, or issuing convertible bonds or preferreds.
- The book covers a wide range of topics including portfolio diversification, capital structure optimization, and valuation methods for convertibles.
- Convertibles historically have provided returns similar to common stocks but with lower volatility.
- The book includes case studies and empirical data to support its recommendations.
- It also discusses the evolution of convertibles and recent changes in accounting standards and tax laws affecting the asset class.
Convertible Securities: A Complete Guide to Investment and Corporate Financing Strategies. 2022. Tracy V. Maitland, F. Barry Nelson, CFA, and Daniel G. Partlow. McGraw Hill.
Introduction
Convertible Securities: A Complete Guide to Investment and Corporate Financing Strategies is a comprehensive resource for professionals interested in convertible bonds and preferreds. The book covers various topics, ranging from portfolio diversification to valuation methods. It also provides case studies and empirical data to support its recommendations. The following review highlights the key points discussed in the book.
Convertible Securities as an Investment
Convertibles have historically provided returns similar to common stocks but with lower volatility. They offer investors the opportunity to capture upside potential while mitigating downside risk through their bond-like characteristics. Convertibles can be used to diversify a portfolio and optimize a company’s capital structure.
Valuation Methods and Trading Strategies
Convertible Securities introduces quantitatively sophisticated valuation methods and trading strategies. The book explains terms of art such as “ASCOTs,” “zomma,” “nuking,” and “happy meal,” which may be unfamiliar to many practitioners. The authors provide detailed guidance on applying these methods in real-world scenarios.
Recent Developments and Implications
The book covers the evolution of convertible securities from their 19th-century origins to recent developments such as the Tax Cuts and Jobs Act of 2017 and changes in accounting standards for convertible issuers. The authors analyze the impact of these developments on the investment landscape.
Points to Consider
While the book is comprehensive and provides valuable insights, readers should pay close attention to the authors’ nuanced language. The authors avoid making overstated claims and acknowledge uncertainties in certain areas. It is essential to carefully interpret the information presented.
Conclusion
Convertible Securities: A Complete Guide to Investment and Corporate Financing Strategies is a valuable resource for professionals interested in convertible bonds and preferreds. The book covers a wide range of topics, from basic financial theory to advanced valuation methods. It provides practical guidance and empirical data to support its recommendations. Professionals in North America, Europe, and Asia will find this book particularly useful.
Full disclosure: The reviewer is mentioned in this book’s acknowledgements and in an endnote.
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