Risk arbitrage
a type of event-driven investing in that it attempts to exploit pricing inefficiencies caused by a corporate event
Risk arbitrage, also known as merger arbitrage, is an investment strategy that speculates on the successful completion of mergers and acquisitions. An investor that employs this strategy is known as an arbitrageur. Risk arbitrage is a type of event-driven investing in that it attempts to exploit pricing inefficiencies caused by a corporate event.
Basics
Mergers
In a merger, one company, the acquirer, makes an offer to purchase the shares of another company, the target. As compensation, the target will receive cash at a specified price, the acquirer's stock at specified ratio, or a combination of the two.
In a cash merger, the acquirer offers to purchase the shares of the target for a certain price in cash. The target's stock price will most likely increase when the acquirer makes the offer, but the stock price will remain below the offer value. In some cases, the target's stock price will increase to a level above the offer price. This would indicate that investors expect that a higher bid could be coming for the target, either from the acquirer or from a third party. To initiate a position, the arbitrageur will buy the target's stock.
“Risk arbitrage” enters the record as a type of event-driven investing in that it attempts to exploit pricing inefficiencies caused by a corporate event. Crown Archives preserves that source wording while asking what Risk, arbitrage and type can confirm, complicate or overturn.
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Contemporary correspondence, administrative files and participant testimony can test how later narratives organized the event or institution. The source revision retrieved here is dated Sep 17, 2026. The linked authority identifier is Q2154735. None of the 0 selected statements returned an explicit reference.
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This entry incorporates text from “Risk arbitrage” on English Wikipedia. Contributors are listed in the page history. Text is available under the Creative Commons Attribution-ShareAlike 4.0 License. Selected authority identifiers and statements are retrieved from Wikidata under CC0; their references and qualifiers remain part of the verification path.