JOURNAL ARTICLE

Testing an Arbitrage Strategy between FLOT Floating Rate Bond ETF and LQDH Interest Rate Hedged Corporate Bond ETF Securities.

  • Published In: Journal of Fixed Income, 2025, v. 35, n. 2. P. 42 1 of 3

  • Database: Business Source Ultimate 2 of 3

  • Authored By: Goldberg, Robert S.; Ronn, Ehud I. 3 of 3

Abstract

The study focuses on analyzing the risk and return profiles of two categories of fixed-income bonds, FLOT Floating Rate Bond ETF and LQDH Interest Rate Hedged Corporate Bond ETF. Because of their similarity, they are particularly amenable to an analysis of whether they are correctly priced relative to each other. Assuming that credit risk is identical across these two instruments, market-efficiency theory suggests that their relative return should reflect their relative duration, the sensitivity to changes in interest rates. Applying the theory to regression- and arbitrage-based empirical tests, we find the instrument with the superior Sharpe ratio does deliver superior returns. [ABSTRACT FROM AUTHOR]

Additional Information

  • Source:Journal of Fixed Income. 2025/10, Vol. 35, Issue 2, p42
  • Document Type:Article
  • Subject Area:Business and Management
  • Publication Date:2025
  • ISSN:1059-8596
  • DOI:10.3905/jfi.2025.1.211
  • Accession Number:188764304
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