Labels

_fuxi (75) _IV (146) _misc (5) {610610 (30) algo (1) automatedTrading (8) banking/economy (3) book (14) c++misc (125) c++real (15) c++STL/java_container (7) cppTemplate (1) db (13) DB_tuning (4) deepUnder (1) dotnet (69) eTip (17) excelVBA (12) finance+sys (34) financeMisc (24) financeRisk (2) financeTechMisc (4) financeVol (21) finmath (17) fixedIncome (25) forex (16) IDE (24) invest (1) java (43) latency (4) LinearAlgebra (3) math (30) matlab (24) memoryMgmt (11) metaPrograming (2) MOM (15) msfm (1) murex (4) nofx (11) nosql (3) OO_Design (1) original_content (4) scriptUnixAutosys (19) SOA (7) socket/stream (15) sticky (1) subquery+join (2) swing (32) sybase (6) tech_orphan (12) tech+fin_career (30) telco (11) thread (21) timeSaver (13) tune (10) US_imm (2) US_misc (2) windoz (20) z_algo+dataStructure (4) z_arch (2) z_c#GUI (30) z_career (10) z_career]US^Asia (2) z_careerBig20 (1) z_careerFinanceTech (11) z_FIX (6) z_forex (31) z_hib (2) z_ikm (7) z_inMemDB (3) z_j2ee (10) z_oq (14) z_php (1) z_py (26) z_quant (4) z_skillist (3) z_spr (5)

Tuesday, May 27, 2014

merger arbitrage, basics

Naive strategy -- between announcement and completion, buy the target company, sell the acquirer.

If aborted, we are likely to lose, as prices return to normal.

To hedge this risk, we can sell an index. A market decline is often correlated with a failed merger.