2. INTRODUCTION
Entity: Endowment Fund
Goal: Short Term Return
Minimal Risk
Seeking: Hedging through Convertible Arbitrage
Investment: Intel
3. CONVERTIBLE BOND
SELECTION
Parity Type Coupon rate
Convertible
≥ 85% ≥ 0%
Convertible/Call
Maturity S&P Rating Bid-Ask Spread
≥ One Year Investment Grade Small
Put Option
Bond Volume
Volume
Good
> 100
SoSo
4. BOND LIST AFTER
FILTERING
Issuer Name Parity Type Cpn % Maturity Date
S&P Bid-Ask
Ask Price Volume
Option
Rating Spread Volume
Gilead Sciences Inc 103% CONVERTIBLE 1.0 5/1/2014 A- 0.00 224.30 1702 GOOD
Gilead Sciences Inc 101% CONVERTIBLE 1.6 5/1/2016 A- 0.00 226.68 1160 GOOD
Mylan Inc/PA 99% CONVERTIBLE 3.8 9/15/2015 BBB- 0.00 213.55 10018 SOSO
Xilinx Inc 93% CONVERTIBLE 3.1 3/15/2037 BBB-u 0.00 131.30 2555 GOOD
ProLogis LP 89% CONVERTIBLE 3.3 3/15/2015 BBB- 0.00 118.95 12203 SOSO
Ares Capital Corp 82% CONVERTIBLE 5.8 2/1/2016 BBB 0.00 107.38 126 SOSO
Intel Corp 82% CONVERTIBLE 3.3 8/1/2039 A- 0.00 120.83 2500 GOOD
• We did not consider the first three bonds because ….
it behaves like an Equity. Gilead and Mylan are deep in the money
Gilead: Stock Price = $52.01, Conversion Price = $22.54
Mylan: Stock Price = $28.02, Conversion Price = $13.32
• We did not consider Prologis LP and Ares Capital Corp because ….
their value are almost from fixed income revenue.
Prologis LP : 91%
Ares Capital Corp : 97%
5. INTEL
Largest semiconductor firm in the world
Dominates the PC microprocessor market.
Designs and manufactures integrated digital technology platforms.
A platform consists of microprocessor and chipset.
6. NEWS
Struggling on PC side of its business, but is making aggressive
moves in the data center and enterprise computing sector.
Data-center group experienced a 6% rise in unit volumes year
over year yet experienced a 6% sequential decline in volume.
Over the last 3 years, the company has spent roughly $8.5B
between the acquisitions of McAfee and Wind River. – Not
produced any positive results yet
Intel buying Mashery – a API Management Portal company
7. MORNING STAR REPORT
Last Price $21.82
Fair Value $26.00
Consider Buy $18.20
Consider Sell $35.10
Uncertainty Medium
Market Cap (Million) $107.95
52-Week High (USD) $29.20
52-Week Low (USD) $19.23
Indeed,the CBOE’s Vix index closed on Monday at 11.6, its lowest since February 2007. The Vix is a measure of expected stock market volatility, but tends to be closely correlated to equity declines and has thus come to be known as Wall Street’s fear index.Depending on one’s disposition, the low Vix is a signal of irrational complacency and therefore a precursor to a market sell-off, or it allows for cheap portfolio protection to be bought and is therefore helping to feed investor stock accumulation.Whichever theory proves correct, the Vix firmed on Tuesday, up 6.2 per cent to 12.3, as it reacted to the mild pullback in the cash market.The CBOE Vix index, dubbed Wall Street’s fear gauge, touched a fresh six-year low on Monday as US stocks rose in week’s first trading session.The Vix, which measures implied volatility on the S&P 500, fell 8 per cent to 11.58. The index, a closely watched measure of investors’ nervousness, has fallen steadily as stocks have approached record levels.The S&P 500 climbed 0.3 per cent to 1,556.22 in New York. The benchmark remained inched to within 9 points of its all-time closing high, adding to its gains from last week when employment data showed the country’s labour market was adding jobs. (March 8)