Risk Factors Related to Investments in Distressed Securities
Market risks related to the economy, interest rates, and the state of the market are relatively unimportant when considering investments in distressed securities. There are, however, several types of risks that particularly apply to investments in distressed securities.
Event risk relates to unexpected company-specific or situation-specific events that affect valuation.
Market liquidity risk arises because distressed securities are less liquid, and demand runs in cycles.
J-factor risk relates to the judge presiding over bankruptcy proceedings. The track record in adjudication and restructuring can play a significant role in both the overall outcome and determining the optimum securities in which to invest.
For more information, see all articles on: Active Management, Alternative Assets, Investing in Distressed Securities, Portfolio Management, Risk Management See also:
The Intelligent Investor: The Classic Text on Value Investing
Financial Statement Analysis: A Practitioner's Guide, 3rd Edition
Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)
