| Distressed Securities |
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Information AboutDistressed Securities |
| CATEGORIES ABOUT DISTRESSED SECURITIES | |
| fixed income securities | |
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The theory behind investing in these securities is that they often trade at discounts to a rational assessment of their risk-adjusted value for a variety of reasons. The psychological effect of a bankruptcy filing may lead to undervaluation, for example. Or Institutional Investors often have policies that prevent them from investing in such circumstances, and that automatically means a lessening of demand for the instruments, which may again lead to undervaluation. Distressed Securities have also been defined as securities, if not in default, that have a Yield to Maturity in excess of 1000 basis points over the riskless rate of return. |
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