September 8th, 2004, 10:54 am
From a purely interest rate hedging standpoint, your pure hedge would be to swap the coupons of the CB into floating with a plain IR swap.With either hedging tool, the CB will leave you holding the bag in the event of a default, call, or conversion, especially since the last two care more about market value than par value, but then again, that's why they pay you the big bucks...