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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 MatchesSpecial arbitrage accountSpecial arbitrage accountA margin account with lower cash requirements, reserved for transactions that are hedged by an offsetting position in futures or options. Reversal ArbitrageReversal ArbitrageA riskless arbitrage that involves selling the stock short, writing a put, and buying a call. The options have the same terms. 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. Triangular arbitrageTriangular arbitrageArbitrage among three currencies. For example (letting x/y be the currency x per unit of currency y exchange rate), if $/¥ > ($/£)(£/¥), then an arbitrager can make a profit buying £ with $; buying ¥ with those £; and then selling those ¥ for $. Multiple ArbitrageMultiple ArbitrageIn the context of hedge funds, a style of management where by the fund employs more than one arbitrage strategy. Portfolio manager opportunistically allocates capital among the various strategies in order to create the best risk/reward profile for the overall fund. Common strategies include merger arbitrage, convertible arbitrage, fixed income arbitrage, long/short equities pairs trading, and volatility arbitrage. In the context of equity and private equity investment, this refers to an investment in a firm where by standard multiples (earnings/price, book/price) indicate the price is far cheaper than industry averages. Further SuggestionsCurrency arbitrageConvertible Arbitrage International arbitrage Arbitrage bonds Riskless arbitrage Tax arbitrage Triangular arbitrage Covered interest arbitrage Locational arbitrage Arbitrage Risk controlled arbitrage Index arbitrage Arbitrage free option pricing models Arbitrageur Covered interest arbitrage Arbitrage Trading Program (ATP) conversion arbitrage One-way arbitrage arbitrageur Structured arbitrage transaction Discount Arbitrage |
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