A²PT · Strategy Learning Hub
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156 strategies. Learn the idea through a story, see the mechanics, then test the payoff against real observations.
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- 049Carry
CDO tranche carry
CDO tranche carry may buy a wider-spread junior tranche and hedge part of its spread delta with a credit index, another tranche or CDS. The headline spread difference is not risk-free income: tranche losses depend on portfolio defaults, correlation and attachment/detachment points, while the hedge has basis and jump risk. The simulator only combines assumed annual spread carry, funding, spread shock and costs.
- 050Carry
MBS trading
An investor can buy an MBS passthrough and use a pay-fixed swap or futures to reduce first-order rate duration. Borrower prepayment options shorten duration as rates fall and extend it as rates rise, creating negative convexity and dynamic-hedging needs. Spread carry does not guarantee total return; funding, servicing, prepayments, OAS, basis and convexity-hedge costs matter.
- 051Arbitrage & relative value
Convertible arbitrage
A convertible combines debt cash flows with an equity conversion option. Relative-value trades often buy the bond and short delta times the conversion ratio in shares, rebalancing as delta changes. Potential return sources include the conversion option, volatility, coupon and relative valuation; credit spreads and convertible liquidity can deteriorate together, so delta neutrality does not prevent large losses.
- 052Arbitrage & relative value
Tax arbitrage
Tax arbitrage seeks after-tax cash-flow differences across instruments, investors or regimes. US municipal-bond interest may be exempt from federal income tax, but IRS guidance says interest on borrowing to buy or carry tax-exempt securities is not deductible; borrowing cost cannot simply be multiplied by (1−τ). This scenario compares exempt yield with a taxable yield after an entered tax rate and extra costs; it is not tax advice.
- 053Hedging & risk management
Inflation hedging
In a zero-coupon inflation swap, the realised-CPI receiver and fixed-rate payer settle the cumulative index change at maturity. TIPS adjust principal with CPI, but their market prices also depend on real yields. Property and commodities do not track consumer prices one-for-one. A hedge must match the liability index, horizon and inflation sensitivity.
- 054Event-driven & special situations
Distressed debt investing
Distressed-debt investors buy defaulted or risky claims at a discount and estimate recovery through reorganisation, asset sale or liquidation. Chapter 11 can let a firm continue operating and propose a plan, but priority, creditor voting, court confirmation, superpriority financing and equity dilution affect recovery. Scenario probabilities are assumptions, not empirical forecasts; timing, discounting and legal costs matter.
- 055Factors & multi-factor investing
Distress risk puzzle
The distress-risk puzzle describes evidence that high-default-probability stocks can have lower, not higher, average returns in some samples. A healthy-minus-distressed factor estimates distress scores from accounting and market variables, then buys healthier firms and shorts more distressed ones. It is a sample- and model-dependent empirical anomaly with industry, liquidity, leverage and market-beta exposures, not a risk-free reversal trade.
- 056Alternative assets
Fix-and-flip
Fix-and-flip buys a property needing work, renovates it and resells. Total cost includes purchase and construction, contingency, financing, taxes, insurance, utilities, holding period and transaction expenses. Estimate cash-on-cash return using a conservative resale price and schedule, with reserves for delays and structural surprises.
- 057Alternative assets
Illegal cash activities listed in the book
The cited source lists money laundering and loan sharking only by name and legal character and explicitly excludes operational methods. This page is not a trading strategy and does not describe how to carry out or evade enforcement of unlawful activity. Its simulator only illustrates how asset restraint or forfeiture, monetary sanctions, restitution and legal-response costs could add up in a hypothetical case. Every amount is user-entered and is not a legal conclusion for any jurisdiction.
- 058Hedging & risk management
Liquidity management
Liquidity management is more than choosing a cash percentage: it matches redemptions, margin calls and operating needs with how quickly assets can be monetised. Cash can reduce forced-sale risk but may earn less. Reserve needs change with liabilities, financing terms and market depth.
- 059Carry
Secured lending：REPO
A repo exchanges securities for cash with an agreement to repurchase them later at a stated price; a reverse repo lends cash against collateral. A haircut cushions small collateral moves but does not prevent losses from price declines, margin calls, tenor mismatch or funding interruptions.
- 060Machine learning
Artificial neural network forecasting
An artificial neural network weights features, applies nonlinear transformations and produces a class score. Financial time series are prone to overfitting: leakage, feature selection, class imbalance and regime change can undermine strong training results. Evaluation needs time-ordered validation and trading costs.