We study risk and return properties of capital structure arbitrage strategies aiming to profit from temporal mispricing … between equity and credit default swaps (CDSs) of companies. We find that capital structure arbitrage provides an attractive … annualized return of 24.35% on invested capital. The arbitrage returns are higher for lower rated companies and surprisingly they …

forwardforeign exchange prices from interest parity forward prices. Second, the role oftransaction costs in one-way arbitrage …-based interest parity has not been examined.Applying the Fletcher and Taylor approach to one-way arbitrage-based interest parity … implied by one-way arbitrage, does not diminish therole of transaction costs; (ii) the varjances of the estimated deviations …