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Merger Arbitrage |
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Merger ArbitrageIn the context of hedge funds, a style of management that involves the simultaneous purchase of stock in a company being acquired and the sale of stock in its acquirer.Merger Arbitrage Similar MatchesConversion arbitrageConversion arbitrageThe simultaneous purchase of a stock, the purchase of a put, and the sale of a call, creating a riskless transaction. ArbitrageArbitrageThe simultaneous purchase and sale of two different, but closely related, securities to take advantage of a disparity in their prices. Alternatively, the purchase and sale of the same security in different markets.Originally, most arbitrage occurred in the currency markets: arbitrageurs would buy in one market and sell in another. Nowadays, the practice applies equally to commodities, futures and stocks. For instance, if a company is dual-listed on two stock exchanges, and the prices are at variance, an arbitrageur has an opportunity to buy in one market and sell in another before the disparity is closed. Index arbitrageIndex arbitrageAn investment/trading strategy that exploits divergences between actual and theoretical futures prices. An example is the simultaneous buying (selling) of stock index futures (i.e., S&P 500) while selling (buying) the underlying stocks of that index, capturing as profit the temporarily inflated basis between these two baskets. Often, the point at which profitability exists is expressed at the block call as the number of points the future must be over or under the underlying basket for an arbitrage opportunity to exist. See: Program trading. Covered interest arbitrageCovered interest arbitrageA combination of transactions on two countries' securities and exchange markets designed to profit from failure of covered interest parity. A typical set of transactions would include selling bonds in one market, using the proceeds to buy spot foreign currency and foreign bonds, and selling forward the return at a future date. See also one-way arbitrage. Triangular arbitrageTriangular arbitrageStriking offsetting deals among three markets simultaneously to obtain an arbitrage profit. Further SuggestionsArbitrage bondsOne-way arbitrage Special arbitrage account Arbitrageur Risk controlled arbitrage International arbitrage arbitrageur Discount Arbitrage Arbitrage Covered interest arbitrage Locational arbitrage Structured arbitrage transaction Currency arbitrage Triangular arbitrage Riskless arbitrage Reversal Arbitrage Multiple Arbitrage Arbitrage Trading Program (ATP) Arbitrage free option pricing models Convertible Arbitrage Tax arbitrage |
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