risk arbitrage
1
9.9
- noun
- /rɪsk ˈɑːrbɪtrɑːʒ/
- Specialized
:
arbitraje de riesgo
- The strategy of risk arbitrage involves buying shares of a company that is being acquired while short selling the acquiring company's shares to manage risk.
Examples
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Investors often turn to risk arbitrage when they believe a merger will succeed, allowing them to profit from the price difference of the two companies' stocks.
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Effective risk arbitrage requires in-depth analysis of both companies involved in the deal.
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Many hedge funds specialize in risk arbitrage to profit from merger announcements.
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The failure of the merger caused significant losses for those engaged in risk arbitrage.
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Many investors engage in risk arbitrage during mergers.
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The strategy of risk arbitrage can be profitable.
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During periods of high activity in the stock market, risk arbitrage can provide opportunities for investors to capitalize on fluctuations caused by pending acquisitions.
Synonyms
Buying shares of a company being bought and selling the buyer's shares to profit, with risk if deal fails
Antonyms
Surface Forms
Morphology
The compound is compositionally built from 'risk' + 'arbitrage', so a learner who knows both words can infer it refers to a type of arbitrage that involves significant risk. However, the specific meaning (the merger/takeover trading strategy and its mechanics) is technical finance jargon that a B1 learner would not reliably predict without domain knowledge.
Etymology
The term risk arbitrage comes from the trading idea of arbitrage, where you buy one stock and sell another to make a profit, and the word risk, because you are really making a 'bet' that a 'takeover' will finish. So risk arbitrage means buying into a deal to try to earn money, but it can lose a lot if the deal fails.