Final_1.pdf
We now begin the description of our approach. Note that we could choose a threshold level anywhere in the continuous range from ...
Let us now attempt to explain the reason why we obtain such a noisy es- timate for the profit profile. Note that we have a fine ...
known as regularization. The following section contains an in-depth de- scription of the regularization process. Upon completion ...
smoothness. In the process of evaluating the function given data, it is very likely that the two cost measures are somewhat at o ...
many different names. Methods that use a log-like function for the cost measure are popularly called maximum entropy methods, or ...
spread exceeds the thresholds. The count is this example is represented as a fraction, which is obtained by dividing it by the t ...
to a deterioration of fit in favor of increased smoothness. Then again, past another value of l, the fit error becomes insensiti ...
Tying Up Loose Ends In this section we highlight some issues of importance that were not covered in the earlier discussions. Mul ...
determined based on the data in the immediate past. The process could be repeated at regular time intervals and the spread level ...
Risk Arbitrage Pairs PART Three ...
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139 Introduction Risk arbitrage in its general connotation relates to trading around corporate events that alter the capital str ...
occurs when a company decides to acquire another company. Shareholders of the acquired company receive cash in exchange for thei ...
(^2) I. F. Boesky, Merger Mania-Arbitrage: Wall Street’s Best Kept Money Making Se- cret. New York: Holt, Rinehart and Winston, ...
announcement is made prior to the drafting of the definitive agreement. In such cases, the announcement would be construed as an ...
(^3) Brian Burrough and John Helyar, “Barbarians at the Gate: The Fall of RJR Nabisco.”HarperCollins(Jan. 1991). Risk Arbitrage ...
The role of the transaction terms in a deal is to mitigate some of the vari- ability of the price of the bidder stock and try to ...
determined using either the fixed ratio or the fixed value method. We illus- trate the transaction terms with an example. Bidder ...
fact that each target share is exchanged for a fixed number of bidder shares or bidder shares plus cash, the value of which we s ...
So, how do we go about trading on this disparity? This is indeed the topic for the next section, Trading Strategy. Trading Strat ...
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