Risk Arbitrage (Noun)
Meaning
Arbitrage involving risk; as in the simultaneous purchase of stock in a target company and sale of stock in its potential acquirer; if the takeover fails the arbitrageur may lose a great deal of money.
Classification
Nouns denoting acts or actions.
Examples
- The investment firm engaged in a form of risk arbitrage, betting on the success of the corporate takeover deal by buying and selling the relevant stocks simultaneously.
- The takeover failed, leaving the arbitrageur who had engaged in risk arbitrage facing significant financial losses due to their high-stakes bet.
- As the deadline for the corporate takeover drew near, investors turned to risk arbitrage to capitalize on the impending deal.
- In risk arbitrage, timing and accurate analysis are crucial in mitigating the substantial losses that may result if the anticipated deal falls through.
- Engaging in risk arbitrage involves navigating the intricacies of merger negotiations while navigating high-risk trading to yield a substantial profit if successful.