A Fresh Look at Merger Risk

Topics:
Investment Strategy
Tags:
Arbitrageurs,
Finance,
Harvard Knowledgebase,
Investment,
Merger,
Mergers & Acquisitions
Source:
Harvard Knowledgebase

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Overview: Article discloses that merger arbitrage is riskier than it looks. Arbitrageurs are used to trying to explain the complexities of what they do engaging in trading strategies that take advantage of pricing differences between a security, currency, or commodity traded on several markets. To the investing public, they often loom like secretive denizens of Wall Street, with a gluttonous appetite for risk and an uncanny ability to snag big profits in return. In the eyes of professional investors, on the other hand, "arbs" generate returns by providing liquidity and eliminating market inefficiencies. Risk or merger arbitrage involves assessing the likely outcome of announced mergers and acquisitions. After a corporate merger at a premium is announced, the stock price of the takeover target usually rises.

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Format: HTML | Date: Feb 2002 | Pages: 1

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