risk arbitrage trading strategy

that the deal is called off or rejected by regulators. The risk arb's play becomes slightly more complicated for a deal that involves cash and stock, but the mechanics are largely the same. Those with an expanded definition of " arbitrage " would point out that the investor is attempting to take advantage of a short-term price discrepancy. If the deal does not happen for whatever reason, the usual result would be a drop - potentially sharp - in fx trading strategy and analysis the stock price of the target and a rise in the stock price of the would-be acquirer.

Risk Arbitrage Trading Strategy Merger Arbitrage and How

risk arbitrage trading strategy

In lowest brokerage for currency trading in india a stock-for-stock merger, risk arbitrage involves buying the shares of the target and selling short the shares of the acquirer. If the deal is completed, and the target company's stock is converted into the acquiring company's stock, the risk arb can use the converted stock to cover his short position. However, the target company's stock price often remains below the announced acquisition valuation. The acquirer will propose to finance the transaction in one of three ways: all cash, all stock or a combination of cash and stock. In an all stock offer, a " risk arb" (as such an investor is known colloquially) buys shares of the target company and simultaneously short sells shares of the acquirer. An investor who is long the target's shares and short the acquirer's shares will suffer losses. In an all stock offer, whereby a fixed ratio of the acquirer's shares are offered in exchange for outstanding shares of the target, there is no doubt that risk arbitrage would be at work. Board of Directors of the target company to accept.

Risk Arbitrage Trading Strategy, Merger Arbitrage and How
Risk Arbitrage Trading Strategy : Merger Arbitrage and How

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