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Risk Arbitrage Opportunities for Stock Index Options
Operations Research, 2021Research about equity index options has shown that option prices systematically violate rational pricing bounds for the risk-averse representative investor. These results raise the question of whether profitable trading possibilities exist in this market. Standard portfolio optimization does not apply because of the large bid-ask spreads and low quote
Thierry Post +1 more
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Risk Arbitrage in Tender Offers
The Journal of Portfolio Management, 1992zewski. T he merger mania that began in the late ' 1970s has been uniquely characterized by the extensive role risk arbitrageurs played in the process of mergers and acquisitions. In general, risk arbitrage is the purchasing of securities immediately after the announcement of a merger, when the arbitrageur attempts to lock in the fixed spread between ...
William P. Dukes +2 more
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Synchronization risk and delayed arbitrage
Journal of Financial Economics, 2002We argue that arbitrage is limited if rational traders face uncertainty about when their peers will exploit a common arbitrage opportunity. This synchronization risk—which is distinct from noise trader risk and fundamental risk—arises in our model because arbitrageurs become sequentially aware of mispricing and they incur holding costs.
Dilip Abreu, Markus K Brunnermeier
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SSRN Electronic Journal, 2007
A traditional VaR approach is not suitable to assess the risk that merger arbitrage funds carry in their portfolios. We propose a simple two-state or three-state model that captures the risk characteristics of the deals in which merger arbitrage funds invest.This model has been tested on a set of mergers and acquisitions between large US public ...
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A traditional VaR approach is not suitable to assess the risk that merger arbitrage funds carry in their portfolios. We propose a simple two-state or three-state model that captures the risk characteristics of the deals in which merger arbitrage funds invest.This model has been tested on a set of mergers and acquisitions between large US public ...
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Arbitrage and Risk Arbitrage in the Nikkei Put Warrant Market
Wilmott, 2018This paper describes a risk arbitrage set of trades using the Nikkei put warrants traded in Toronto and New York around the time of the great 1990 crash in Japanese stock and land prices.
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Arbitrage Asset Pricing under Exchange Risk
The Journal of Finance, 1991ABSTRACTThis paper extends the APT to an international setting. Specifying a linear factor return‐generating model in local currency terms, we show that the usual risk‐diversification rule in the APT does not yield a riskless portfolio unless currency fluctuations obey the same factor model as asset returns.
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Agricultural Arbitrage and Risk Preferences
2007A structural inter-temporal model of agricultural asset arbitrage equilibrium is developed and applied to agriculture in the North-Central region of the U.S. The data is consistent with unifying level of risk aversion. The levels of risk aversion are more plausible than previous estimates for agriculture.
Pope, Rulon D. +5 more
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Arbitrage, Risk Arbitrage and the Favorite-longshot Bias [PDF]
AbstractThe following sections are included:The favorite-longshot biasRisk arbitrage in the US presidential ...
Rachel E. S. Ziemba, William T. Ziemba
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Arbitrage Pricing with Estimation Risk
The Journal of Financial and Quantitative Analysis, 1993This paper considers the Arbitrage Pricing Theory when investors have incomplete information on the parameters generating asset returns. Each asset in the economy may have a different amount of information available on it. Bayesian investors use their prior beliefs in conjunction with the total available information to assign an expected return and a ...
Puneet Handa, Scott C. Linn
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Risk Shifting and Regulatory Arbitrage: Evidence from Operational Risk
SSRN Electronic Journal, 2017Regulations leading up to the financial crisis of 2007-2009 provided incentives for banks shift their risk profiles toward less regulated areas. We focus on the case of operational risk which went from being a relatively benign and largely unregulated risk type to a major risk that now accounts for about 25% of large banks' risk profile.
Brian Clark, Alireza Ebrahim
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