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arbitrage, information theft and insider trading

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  • Michael C. Jensen

Abstract

Risk arbitrage involves the purchase of a target firm's shares on the announcement of a merger or tender offer. These transactions provide a risky profit opportunity when the price of the target is below the risk-adjusted expected value of the final takeover price. This article explores the role of arbitragers in the merger and acquisition of firms, and how their role is important to the process and is not to be confused with insider-trading.

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This chapter was published in: Steven N. Durlauf & Lawrence E. Blume (ed.) , , chapter 1, pages , 2012,1st quarter update.

This item is provided by Palgrave Macmillan in its series The New Palgrave Dictionary of Economics with number v:6:year:2012:doi:3874.

Handle: RePEc:pal:dofeco:v:6:year:2012:doi:3874

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Keywords: takeovers; mergers and acquisitions; Securities and Exchange Commission; arbitragers;

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