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Note on Risk Arbitrage
內容大綱
This note introduces the concept of risk or merger arbitrage. Risk arbitrage is an investing method that attempts to capitalize on announced transactions pertaining to mergers, spin-offs, takeovers, liquidations, and corporate restructuring. The arbitrageur attempts to create riskless profit by simultaneous purchases and/or sales of assets that are part of an announced transaction. In the note, we outline the basics types of deals — including cash mergers, stock mergers, cash-stock deals and embedded options — and the methods to evaluate their profitability. The note also provides information on using Bloomberg’s mergers and acquisitions database and the Bloomberg M&A Analysis function to track pending transactions in the early and mid-2000s.