{
  "slug": "fixed-income-relative-value",
  "name": "Fixed Income Relative Value",
  "aliases": [
    "FI RV",
    "Rates Relative Value"
  ],
  "category": "relative-value",
  "description": "A relative-value strategy that exploits pricing discrepancies between related fixed-income instruments (e.g., on-the-run vs off-the-run Treasuries, swap-spread, asset-swap, basis trades) using high leverage and tight risk controls.",
  "investment_thesis": "Closely-related instruments occasionally diverge from no-arbitrage relationships due to flow imbalances, regulatory friction, or market segmentation; these spreads converge on a measurable schedule.",
  "edge_source": "Quantitative modeling, financing relationships (repo), regulatory arbitrage, and patient capital.",
  "typical_holding_period": "1 day to 2 years",
  "typical_leverage": {
    "min": 5,
    "max": 30,
    "typical": 12
  },
  "expected_volatility": {
    "min": 4,
    "max": 12,
    "unit": "annualized-pct"
  },
  "expected_sharpe": {
    "low": 0.7,
    "high": 1.5
  },
  "drawdown_profile": "Highly negative skew — LTCM blueprint. Dependence on stable financing means losses cluster in funding crises.",
  "correlation_to_equities": 0.1,
  "correlation_to_bonds": 0.2,
  "liquidity_profile": "monthly",
  "instruments_used": [
    "government bonds",
    "interest-rate swaps",
    "repo",
    "futures",
    "swaptions"
  ],
  "asset_classes": [
    "rates"
  ],
  "primary_risks": [
    "repo financing risk",
    "VaR-driven deleveraging",
    "model risk",
    "tail correlation"
  ],
  "macro_regime_sensitivity": {
    "rising_rates": "Mixed — depends on positioning",
    "high_volatility": "Spreads widen but financing tightens",
    "recession": "Funding stress can be catastrophic",
    "bull_market": "Compressed spreads, low returns"
  },
  "fee_structure": {
    "management_fee": "1.5%-2.5%",
    "performance_fee": "20%-25%",
    "high_water_mark": true
  },
  "key_metrics": [
    "DV01",
    "carry",
    "roll-down",
    "convexity-adjusted P&L"
  ],
  "notable_practitioners": [
    "LTCM (historical)",
    "Capula",
    "BlueCrest (former)",
    "Citadel Global Fixed Income"
  ],
  "exemplar_funds": [
    "capula",
    "millennium"
  ],
  "related_terms": [
    "basis-trade",
    "swap-spread",
    "repo",
    "on-the-run",
    "convexity"
  ],
  "related_strategies": [
    "global-macro",
    "convertible-arbitrage"
  ],
  "historical_drawdowns": [
    {
      "year": 1998,
      "event": "LTCM collapse",
      "estimated_drawdown_pct": -90
    },
    {
      "year": 2020,
      "event": "March 2020 Treasury basis blow-up",
      "estimated_drawdown_pct": -10
    }
  ],
  "academic_foundations": [
    "Vasicek (1977)",
    "Heath-Jarrow-Morton (1992)",
    "Duffie & Singleton (1999)"
  ]
}