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August 31, 2026
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I don’t work in distressed debt, I work in rates (Analyst 2 and actively managing risk in derivatives book), but this is how I would think about it.
These are just but a few areas I would start with.
No offence but 2nd point us simply irrelevant in distressed and 1st point is relevant only in credit L/S HF where relval is traded but irrelevant in a value-oriented distressed strategy.
For the poster: the interviewer probably wanted to hear that (1) you distinguish between idiosyncratic and systemic reasons leading that security to trade down and that (2) you compare trading levels vs recovery value (both asset-based / liquidation and as going concern).
Considering whether the implied recovery rate is outside the normal bounds of what can be expected is another way to get some RV from distressed investing.
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