Hedge funds may invest or engage in

A) distressed firms.
B) convertible bonds.
C) currency speculation.
D) merger arbitrage.
E) All of the options are correct.

Distressed Firms

Companies experiencing financial or operational difficulties, often characterized by liquidity problems, default, or bankruptcy risks.

Convertible Bonds

Debt securities issued by a corporation that can be converted into a predetermined number of the company's shares at certain times during the bond's life, usually at the discretion of the bondholder.

Currency Speculation

The act of buying, selling, or holding currencies with the expectation that their value will change to make a profit.