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White Paper
Arbitrage: A Brief Introduction
October 1, 2009
Arbitrage strategies use relative-value trades to generate potential excess returns with attractive risk profiles. We offer a brief introduction to arbitrage, including descriptions of several common strategies and an overview of historical performance.
Journal Article
Characteristics of Risk and Return in Risk Arbitrage
December 1, 2001
After the announcement of a merger or acquisition, the target company’s stock typically trades at a discount to the price offered by the acquiring company.
Journal Article
Arbitrage Crashes and the Speed of Capital
May 27, 2011
Modern finance theory rests on the ability of arbitrageurs to ensure that substantially similar assets trade at substantially similar prices.
White Paper
The Limits of Convertible Bond Arbitrage
September 1, 2009
Convertible bond arbitrage suffered abysmally after the collapse of Lehman Brothers in 2008. This case study looks at how these strategies can break down in times of crisis, and the opportunities they offer in the aftermath.
Book
Merger Arbitrage
July 23, 2003
How does one regulate systemic risk in the financial sector? We propose charging each financial firm a tax based on its expected loss during a systemic crisis.
White Paper
Corporate Arbitrage
May 18, 2023
We introduce the main corporate arbitrage strategies, make the case for a multi-strategy approach, and review the role of a corporate arbitrage allocation within a broader portfolio.
Journal Article
Limited Arbitrage in Equity Markets
December 17, 2002
This paper examines impediments to arbitrage in equity markets using a sample of 82 situations between 1985 and 2000.
Journal Article
The Limits to Arbitrage and the Low-Volatility Anomaly
January 2, 2014
Researchers have found that a strategy of buying prior low volatility stocks and selling prior high volatility risk stocks has historically generated substantial abnormal returns in the U.S.
Quick Clips: Still Dislocated? AQR's Arbitrage Outlook
February 17, 2021
The sharp deleveraging across arbitrage markets in March 2020 was followed by very strong performance in 2H 2020. In our recent webinar and summary, we review what drove last year’s returns in SPACs, convertibles and mergers, and discuss why we are optimistic about the outlook for 2021 and beyond.
Journal Article
Price Pressure Around Mergers
February 1, 2004
It has been well documented that when companies use stock as the currency in a takeover, the acquiring company’s share price tends to fall between –2% and –3% around the time a deal is announced.