Risk Arbitrage, 2nd Edition

Risk Arbitrage, 2nd Edition

by Keith M. Moore
Released May 2018
Publisher(s): Wiley
ISBN: 9780470379745

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Book description

The definitive guide to risk arbitrage, fully updated with new laws, cases, and techniques

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

  1. Cover
  2. Title Page
  3. About the Author
  4. CHAPTER 1: Introduction
  5. CHAPTER 2: What Is Risk Arbitrage?
    1. TYPES OF TRANSACTIONS
  6. CHAPTER 3: The Risk Arbitrage Industry
  7. CHAPTER 4: Estimating the Return on a Risk Arbitrage Position
    1. SIMPLE DEALS
    2. STOCK‐FOR‐STOCK DEALS
    3. COMPLEX STOCK MERGER TRANSACTIONS
    4. PRORATED TRANSACTIONS
    5. LEVERAGE
    6. SPREAD BEHAVIOR OVER TIME
    7. TIMING OF RISK ARBITRAGE TRANSACTIONS
    8. ESTIMATING TIMING IN MERGER TRANSACTIONS
    9. ESTIMATING TIMING IN TENDER OFFER TRANSACTIONS
  8. CHAPTER 5: Estimating the Risk of Arbitrage Transactions
    1. ASSESS THE PRICE HISTORY OF THE TARGET COMPANY
    2. ESTIMATING THE TOTAL RISK OF A TRANSACTION
    3. USING OTHER METHODOLOGIES TO ASSESS THE RISK OF ARBITRAGE TRANSACTIONS
    4. CONCLUSION
  9. CHAPTER 6: Estimating the Probability of a Transaction's Occurrence
    1. GATHERING INFORMATION
    2. CONDUCTING INITIAL RESEARCH
    3. GATHERING FINANCIAL INFORMATION ON THE PROPOSED TRANSACTION
    4. GATHERING LEGAL INFORMATION ON THE PROPOSED TRANSACTION
    5. EXAMPLE
    6. VERTICAL MERGERS
    7. GATHERING TAX AND ACCOUNTING INFORMATION OF A PROPOSED TRANSACTION
    8. CONCLUSION
  10. CHAPTER 7: The Risk Arbitrage Decision Process
    1. DYNAMIC ASPECT OF RISK ARBITRAGE ANALYSIS
    2. EXAMPLE
    3. EVEN‐MONEY PROBABILITY—A TOOL FOR RISK ARBITRAGE DECISION MAKING
    4. EVEN‐MONEY PROBABILITY FORMULA
    5. CALCULATING COMPLEX RISK‐ADJUSTED RETURNS
  11. CHAPTER 8: Hostile Takeovers
    1. DIFFERENCES BETWEEN CONTESTED AND UNCONTESTED TAKEOVERS
    2. TAKEOVER DEFENSES
    3. OTHER TYPES OF DEFENSES
    4. A HOSTILE TAKEOVER CASE: AIRGAS/AIR PRODUCTS
    5. USE OF DECISION TREES
    6. EXAMPLE
    7. ESTIMATING VALUE IN CONTESTED TAKEOVER ATTEMPTS
    8. RISK ASSESSMENT
    9. SUMMARY
  12. CHAPTER 9: Trading Tactics
    1. DETERMINING POSITION SIZE
    2. EXECUTION OF TRANSACTIONS
    3. EXAMPLE: BASS PRO SHOPS' ACQUISITION OF CABELA'S
    4. TIMING OF EXECUTIONS
    5. USING COMPUTERS TO AID TRADING TACTICS
    6. TRADING TRANSACTIONS WITH COLLARS
    7. EXAMPLE: MERGER OF ROCKWELL COLLINS AND B/E AEROSPACE
    8. HEDGING THE COLLAR OPTIONS
    9. SUMMARY
  13. CHAPTER 10: Portfolio Management
    1. POSITION LIMITS AND PORTFOLIO DIVERSIFICATION
    2. SETTING INDIVIDUAL POSITION LIMITS
    3. SENSITIVITY ANALYSIS
    4. PORTFOLIO DEAL‐BREAK RISK
    5. ADDITIONAL METHODS TO LIMIT RISK
    6. FRIENDLY TRANSACTIONS
    7. RECAPS, SPINOFFS, TARGETS FOR SALE, AND SITUATIONS WHERE THE TARGETS HAVE RECEIVED AN OFFER
    8. GROUPING BY CASH FLOW
    9. PORTFOLIO ANALYSIS BY SPREAD
    10. OVERBIDS
    11. HEDGING
    12. MELDING A POSITION SHEET WITH A RISK ARBITRAGE ANALYSIS
    13. OTHER RISK CONTAINMENT MEASURES
    14. FUTURES
    15. OPTION HEDGING
  14. CHAPTER 11: The Exciting World of Risk Arbitrage
    1. THE EVENT TIMELINE: THE STRP/T/VZ DEAL
    2. THE STRP/T/VZ ADVENTURE
    3. THE AFTERMATH OF THE STRP/T/VZ TAKEOVER BATTLE
  15. APPENDIX A: Tender Offer Document
  16. APPENDIX B: Airgas/Air Products—Text of Court Decision
    1. INTRODUCTION
    2. CONCLUSION
  17. APPENDIX C: Whole Foods Markets—Excerpts from Proxy Statement
  18. APPENDIX D: Straight Path Communications—Excerpts from Proxy Statement
  19. APPENDIX E: Straight Path Communications—Excerpts from STRP's 8‐K Filed on April 13, 2017
  20. Acknowledgments
  21. Index
  22. End User License Agreement

Product information

  • Title: Risk Arbitrage, 2nd Edition
  • Author(s): Keith M. Moore
  • Release date: May 2018
  • Publisher(s): Wiley
  • ISBN: 9780470379745