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Arbitrage
LBO
Merger
Acquisition

Risk Arbitrage
Term category: Strategies
In 10 words or less: A strategy that tries to profit from temporary price differences prior to a merger.

Definition: The simultaneous purchase of stock in an acquired company and the sale of stock in a purchasing company.

StockJargon Advice: Usually when a company purchases another company, they see their stock decline slightly. The company being acquired is purchased at a premium, so their stock usually appreciates. Risk arbitrageurs are people who try to profit from this transaction.

This usually isn't something to be done by a regular investor because the stocks move right when these acquisitions are announced, so you'd miss the boat.

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