Examining the recent rising preferred perpetuals and its market anomaly in high yield space
Thesis: M. Fin., Massachusetts Institute of Technology, Sloan School of Management, Master of Finance Program, 2019
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| Format: | Thesis |
| Language: | eng |
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Massachusetts Institute of Technology
2019
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| Online Access: | https://hdl.handle.net/1721.1/122455 |
| _version_ | 1826194150648709120 |
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| author | Lee, Junghwan(Junghwan Steve) |
| author2 | David Thesmar. |
| author_facet | David Thesmar. Lee, Junghwan(Junghwan Steve) |
| author_sort | Lee, Junghwan(Junghwan Steve) |
| collection | MIT |
| description | Thesis: M. Fin., Massachusetts Institute of Technology, Sloan School of Management, Master of Finance Program, 2019 |
| first_indexed | 2024-09-23T09:51:42Z |
| format | Thesis |
| id | mit-1721.1/122455 |
| institution | Massachusetts Institute of Technology |
| language | eng |
| last_indexed | 2024-09-23T09:51:42Z |
| publishDate | 2019 |
| publisher | Massachusetts Institute of Technology |
| record_format | dspace |
| spelling | mit-1721.1/1224552019-11-22T03:35:25Z Examining the recent rising preferred perpetuals and its market anomaly in high yield space Lee, Junghwan(Junghwan Steve) David Thesmar. Sloan School of Management. Master of Finance Program. Sloan School of Management. Master of Finance Program Sloan School of Management. Master of Finance Program. Thesis: M. Fin., Massachusetts Institute of Technology, Sloan School of Management, Master of Finance Program, 2019 Cataloged from PDF version of thesis. Includes bibliographical references (page 26). Since late 2017 when the worldwide business optimism was at its highest, highly leveraged energy companies began to issue unique preferred shares that have character of perpetual subordinated bond and that trade in bond market. Among those firms, DCP Midstream issued another preferred shares that have same feature, but trade in mezzanine market. This paper explores the recent rising preferred shares and its market inefficiency, especially between bond market (par 1000) and mezzanine market (par 25). Assuming the firm exercise its call option for both securities, the paper finds that one can construct a profitable arbitrage strategy with annual Sharpe ratio of 1.775 from these two almost identical securities. My results bring some empirical substance to the discussion on the law of one price in financial markets. Although there are some limitations such as transaction costs and liquidity issues, this market has a degree of inefficiency. by Junghwan (Steve) Lee. M. Fin. M.Fin. Massachusetts Institute of Technology, Sloan School of Management, Master of Finance Program 2019-10-04T22:10:06Z 2019-10-04T22:10:06Z 2019 2019 Thesis https://hdl.handle.net/1721.1/122455 1119721607 eng MIT theses are protected by copyright. They may be viewed, downloaded, or printed from this source but further reproduction or distribution in any format is prohibited without written permission. http://dspace.mit.edu/handle/1721.1/7582 26 pages application/pdf Massachusetts Institute of Technology |
| spellingShingle | Sloan School of Management. Master of Finance Program. Lee, Junghwan(Junghwan Steve) Examining the recent rising preferred perpetuals and its market anomaly in high yield space |
| title | Examining the recent rising preferred perpetuals and its market anomaly in high yield space |
| title_full | Examining the recent rising preferred perpetuals and its market anomaly in high yield space |
| title_fullStr | Examining the recent rising preferred perpetuals and its market anomaly in high yield space |
| title_full_unstemmed | Examining the recent rising preferred perpetuals and its market anomaly in high yield space |
| title_short | Examining the recent rising preferred perpetuals and its market anomaly in high yield space |
| title_sort | examining the recent rising preferred perpetuals and its market anomaly in high yield space |
| topic | Sloan School of Management. Master of Finance Program. |
| url | https://hdl.handle.net/1721.1/122455 |
| work_keys_str_mv | AT leejunghwanjunghwansteve examiningtherecentrisingpreferredperpetualsanditsmarketanomalyinhighyieldspace |