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Homework answers / question archive / Which of the following statements regarding risk arbitrage is?FALSE? A
Which of the following statements regarding risk arbitrage is?FALSE?
A. A potential profit arises from the difference between the?target's stock price and the implied offer? price, and is referred to as the
merger−arbitrage spread.
B.It is not true arbitrage because there is a risk that the deal will not go through. If the takeover did not ultimately? succeed, the
risk−arbitrageur would eventually have to unwind his position at whatever market prices prevailed.
C. Once a tender offer is? announced, the uncertainty about whether the takeover will succeed reduces the volatility of the stock price. This uncertainty creates an opportunity for investors to speculate on the outcome of the deal without bearing the risk of volatility.
D.Traders known as risk−?arbitrageurs, who believe that they can predict the outcome of a? deal, take positions based on their beliefs.
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