equity arbitrage


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Risk Arbitrage

In hedge funds, an investment strategy related to mergers and acquisitions involving the purchase and/or shorting of an acquired company's stock. In a cash merger, the stock of the acquired company often trades below the offer price until the deal is completed. A hedge fund may buy at the lower price and wait for the deal to be completed, at which point it makes a profit. In a stock-for-stock merger, the acquiring company (with more valuable stock) offers to exchange the acquired company's stock for its own at a certain ratio. A hedge fund may then short sell the acquiring company's stock while simultaneously buying stock in the acquired company. When the deal goes through, the acquired company's stock is converted and the new stock returned to the owner from which the hedge fund borrowed. In both these situations, the primary risk is the possibility that the deal may fail in the middle of the hedge fund's transactions. See also: Exchange ratio.

equity arbitrage

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Fortunately, some equity arbitrage hedge funds were able to avoid financials.
Those equity arbitrage funds that specialize in trading volatility helped drive the Morningstar Equity Arbitrage Hedge Fund Index to a gain of more than 8.
Equity arbitrage funds benefited from volatility in the market.
McMillan was a proprietary trader at two major brokerage firms -- primarily Thomson McKinnon Securities, where he ran the Equity Arbitrage Department for nine years.
Similarly, equity arbitrage hedge funds dealt with stock market volatility deftly, returning 2.
FrontPoint Partners LLC, an integrated investment management company, announced that it has added two new investment teams, a quantitative equity arbitrage team and a Canadian distressed securities team.