Risk Arbitrage is the definitive guide to the field and features a comprehensive overview of the theory, techniques, and tools that traders and risk managers need to be effective. This new edition is completely updated and fully revised to reflect the changes to laws and technology and includes new case studies and a detailed discussion of computer-based trading systems. Readers gain deep insight into the factors and policies that affect merger transactions, and the new developments that allow individuals to compete with professionals in managing risk arbitrage portfolios. The book provides techniques for computing spreads and determining risk, with practice exercises that allow readers to become confident with new methods before using them professionally.
The current wave of corporate mergers, acquisitions, restructurings, and similar transactions has created unprecedented opportunities for those versed in contemporary risk arbitrage techniques. At the same time, the nature of the current merger wave has lent such transactions a much higher degree of predictability than ever before, making risk arbitrage more attractive to all types of investors. Risk Arbitrage provides the essential guidance needed to participate in the business. - Get up to date on the most recent developments in risk arbitrage - Examine new mergers and the legal changes that affect them - Learn how computers and trading systems have affected competition - Use the tools that enable risk determination and spread computation
Both the growth in hedge funds and the changing nature of the merger and acquisition business have affected risk arbitrage processes and techniques. For the finance professional who needs expert guidance and the latest information, Risk Arbitrage is a comprehensive guide.
Table of Contents
About the Author xi
CHAPTER 1
Introduction 1
CHAPTER 2
What Is Risk Arbitrage? 9
CHAPTER 3
The Risk Arbitrage Industry 27
CHAPTER 4
Estimating the Return on a Risk Arbitrage Position 33
CHAPTER 5
Estimating the Risk of Arbitrage Transactions 61
CHAPTER 6
Estimating the Probability of a Transaction’s Occurrence 83
CHAPTER 7
The Risk Arbitrage Decision Process 107
CHAPTER 8
Hostile Takeovers 117
CHAPTER 9
Trading Tactics 149
CHAPTER 10
Portfolio Management 173
CHAPTER 11
The Exciting World of Risk Arbitrage 201
APPENDIX A: Tender Offer Document 215
APPENDIX B: Airgas/Air Products - Text of Court Decision 281
APPENDIX C: Whole Foods Markets - Excerpts from Proxy Statement 291
APPENDIX D: Straight Path Communications - Excerpts from Proxy Statement 299
APPENDIX E: Straight Path Communications - Excerpts from STRP’s 8-K Filed on April 13, 2017 329
Acknowledgments 337
Index 339
