municipal bond arbitrage

Definition

A tax arbitrage that creates a system of building up collection of tax-free or tax-exempt municipal bonds whilst protecting oneself against the risk involved with municipal bond collections, such as the duration. It is done by shortening the duration of corresponding taxable corporate bonds with the sole purpose of benefiting from this system of cheap municipal bonds that have longer duration or maturity (when the bonds have to be redeemed).
Browse Definitions by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
municipal bond municipal bond fund