What Is Risk Arbitrage?
Risk arbitrage refers to the failure to take measures to avoid exchange rate risks in the process of arbitrage.
Risk arbitrage
(Financial term)
discuss
- Chinese name
- Risk arbitrage
- Definition
- No measures to avoid exchange rate risks
- Starting time
- 1940
- nickname
- M & A Arbitrage
- Risk arbitrage refers to the failure to take measures to avoid exchange rate risks in the process of arbitrage.
- Basic definition
- Generally, the securities of the M & A companies that have been announced are bought and sold, and the buying and selling time interval is relatively long, which may reach several months.
- US law strictly prohibits investment banks that act as acquisition and counter-acquisition advisors in acquisitions from engaging in risk arbitrage for such acquisitions. In order to avoid accusations and suspicions, major investment banks in the United States generally start risk arbitrage activities after the acquisition intention is announced to the public.
- Risk arbitrage (M & A arbitrage)
- The long-established trading strategy has been operating in the investment bank's self-operated department since 1940, bringing generous returns to investment banks.
- Invest in two companies involved in mergers or acquisitions. In a stock exchange merger, risk arbitrageurs usually go long on the stock of the company being acquired and short the stock of the acquired company; in cash mergers, the risk arbitrageur seeks the difference between the purchase price and the price of the target company.
- Risks: M & A may fail due to uncertainties in negotiations and antitrust requirements from regulatory authorities.