The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Arbitrage, Information Theft and Insider Trading

  • Michael C. Jensen
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2945

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.

Keywords

Takeovers Mergers and acquisitions Securities and Exchange Commission Arbitragers 

JEL Classifications

G3 G32 G34 
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Notes

Bibliography

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Michael C. Jensen
    • 1
  1. 1.