Investors enjoy the coupon rate or yield to put or principal protection.
If there is low credit default risks, bond floor will be relatively high,, even stock prices fall, the drop of ECB price will be relatively lower.
Capital Gains
Covered credit arbitrage
When stock prices rise, the value of ECB also rise. Investors can choose to sell their ECB directly or convert to stocks and sell stocks in stock market before selling them off, thereby enjoying the capital gains from appreciating stock prices.
When discount appears Investor can arbitrage by short stock and buying ECB.
Product & Market Research
