When big money mergers and acquisitions occur, everyone wants to get in on the profits. One strategy for capitalizing on merger and acquisition activity is risk arbitrage, an investment gamble in the target company's stock. In the past, risk arbitrage has been a largely profitable technique enjoyed by hedge funds and Wall Street traders. In today's market, however, the returns from risk arbitraging have declined. So far this year, hedge funds that do risk arbitrage have seen a return of barely 2% on an annualized basis, according to Credit Suisse First Boston Tremont Index LLC. In 2003, the strategy returned almost 9%, an improvement over this year but unimpressive compared to the 14.7% average return in 2000.
...The risk arbitrager buys stock of the target company before the merger...
...(A) the arbitrager borrows dollars from a New York bank;. (B) these d...
This article analyzes the potential use of Chicago Mercantile Exchange (CME) housing futures for hedging, arbitrage and speculative purposes. In this article, the authors explain how futures contracts can be used for hedging, arbitrage and speculative purposes in other more traditional markets, such as copper. They consequently analyze whether housing futures can be used similarly and effectively to participate in the residential real estate market. Although CME housing futures have not attracted significant volumes, it is still comforting to know there is a tool that could prevent a sharp drop in housing values and potentially bail out the U.S. economy. In a low probability scenario where panic liquidation of home inventory would crash home values nationally, an "invisible hand" could ...
...At that point, an arbitrager buys copper in the spot market and sells copper fu...
By Ben Sisario The New York Times
..., he said, describes himself as a "risk arbitrager" and has to go way back to explain how he entered ...
... words, when the specialist acts as an arbitrager by taking a profit on the spread between the b...
Financial institutions frequently offer low introductory interest rates to entice individuals to open and use credit accounts with their firm. This paper examines the possibility of earning arbitrage profits by taking advantage of these special offers. We develop a formula to measure the profit potential from undertaking credit card arbitrage and identify conditions conducive to profitable and unprofitable arbitrage. In addition, we examine the sensitivity of the arbitrage transaction to changes in interest rates, interest rate levels, and fees. Finally, we examine the impact of credit card arbitrage on the credit rating of the arbitrageur.
... arbitrage on the credit score of the arbitrager. If the additional credit balances associated with...
...The ticket scalper is more an arbitrager than a speculator in this case. The scalper is abl...
... Exchange trading floor acts as an arbitrager by taking a profit on the spread between the bid p...
In post-Enron era, many companies strive to become a 'corporate citizen' Greed is good.
... maxim of Gordon Gekko, the fictitious arbitrager in the late 1980s film "Wall Street," succinctly d...
...1951). Thus an arbitrager may buy warrants or rights to buy stock, simultane...
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