Various Types of merger arbritrage
Not what you're looking for?
Arbitrage is the zero-investment purchase of a security financed by the sale of an identical security
Discuss the mechanics of various types of merger arbitrage, I.e., Cash Deals, Stock Mergers, and
complex merger transactions (cash, and various types of stock exchanges). Discuss the mechanics of each type, their potential use, examples of use, and any advantages or disadvantages.
Purchase this Solution
Solution Summary
The solution provides a definition of abritrage, then discusses the various types of merger arbitrage in use today. The mechanics of each type, their potential use, examples of use, and advantages and disadvantages are also discussed. Multiple references are provided.
Solution Preview
Arbitrage is usually defined as the purchase of one security and simultaneous sale of another to give a risk-free profit. "Arbitrage" or "risk arbitrage" often used loosely to describe the taking of positions in related securities at the time of the takeover bid.
Merger arbitrage, also called Risk Arbitrage is one of the most popular hedge fund strategies. It involves buying the stock of the company being acquired while selling short the stock of the acquiring company. Normally the acquirer will offer a premium in order to purchase the target company. After a merger deal is announced, the price of the target company usually moves substantially higher to reflect the premium in value being paid by the acquiring company. Despite this increase, the ...
Purchase this Solution
Free BrainMass Quizzes
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.