Risk Arbitrage Case

The MedImmune Company expected that the transaction will be completed in the first quarter of 2002. The transaction will write off the company's 2002 earnings levels and reach breakeven point in 2003; then the level of its cash surplus will significantly grow (MedImmune, 2001). But from both MedImmune and Avirons’ statement of operations we can see that huge gap of negative earning will not be covered in 2003. From the news afterwards we know that according to the agreement reached by the two companies, MedImmune used 1.075 shares of outstanding stock in exchange of one

b. The optimal transfer price is $0.99, giving a buy-back price of $0.988, and channel profits of $372.62. However, this is an unrealistic scenario because Ralph’s profits are negative at -$24 and

1) Whether the risks that Adair faced were inherent in the activity of rock climbing?

Begelman sells his position in Bluegreen the day the merger is announced for a $14K realized gain.

The market responded favorably to the merger between Loblaw Companies Ltd and Shoppers Drug Mart. News of the agreement sent Shoppers shares to increase by approximately 27% on TSE before falling back to 13%, and Loblaws shares were up almost 9% (Globe and Mail, 2013). On the 15th of July 2013 the announcement was made public, and both companies shares price closed at an alltime high of $50.13 per share for Loblaws and $60.12 per share for Shoppers. During the rest of the same month, Shoppers shares price kept on risen, while Loblaws shares price maintained its usual price below the $50 standpoint (Appendix B).

This case study examines the proposed merger of Vulcan Materials and Martin Marietta both providers of construction aggregates. A stock-for-stock merger had the potential of making the company a global leader in construction materials, but was marred by disagreements over executive succession, location of new headquarters and the stock exchange proposed by Martin Marietta. Furthermore, as negotiations deteriorated Martin Marietta attempted a hostile takeover of Vulcan and also tried to get its directors appointed to

The issue of risk scenario carries immense importance for most of the hospitals that are part of the healthcare setting. However, there is not only one scenario that can affect the hospitals but

A) What is the possible meaning of the changes in stock price for GEICO and Berkshire Hathaway on the day of the acquisition announcement?

A) What is the possible meaning of the changes in stock price for GEICO and Berkshire Hathaway on the day of the acquisition announcement?

3. Merger arbitrage (or risk arbitrage) funds speculate on the completion of stock and cash mergers, typically buying the target and hedging the risk of the acquirer’s shares accordingly to exchange ratio in stock mergers. What positions would risk arbitragers take in this deal? How would their positions change if the board appears to favour Quest offer?

4. AQR’s strategy was required by regulators to be sufficiently diversified among assets, industries as well as companies. And to compare the profitability of both strategies, we estimated the expected returns and risks measured by different ratios, shown as below.

Randolph Corporation is a multidivisional company. Due to frictions among the divisions, Randolph’s stock has not performed according to expectations. In order to improve Randolph’s financial situation and position among its competitors, a number of questions need to be answered. We will discuss these questions separately below.

Interest rate swaps allow a firm to exchange fixed for floating-rate payments, but a swap cannot reduce actual net interest expenses.

In the original order, Nova was billed BRL 104,338.30 for their purchase. After the exchange of currency from BRL to U.S. dollars, Baker was estimated to receive $48,371.24 (104,338.30 * .4636). This means that Baker brought in $55,967.06 less from their deal with Nova than was expected. Since the exchange-rate risk was not managed, Baker brought in significantly less than was estimated from their deal with Nova and after subtracting their total cost from what they brought in, Baker only made a

Many financial instruments have exhibited mean reversion, such as US and global equities [1], commodities [2], foreign exchange rates [3] as well as volatility indices [19]. Moreover, some researchers have also found mean reverting process to be very useful in modeling the interest rate and default risk dynamics [20]. In financial industry, some practitioners even attempt to profit by constructing mean-reverting prices which are usually known as statistical arbitrage or pair trading. Statistical arbitrage is a more sophisticated trading strategy that evolved out of the simpler pairs trade strategy [4]. In the pairs trading, two highly correlated stocks are put into pairs and when one stock outperforms the other, we short this stock and long the other stock. Unlike the pair trading, Statistical arbitrage usually considers a basket of hundreds or more stocks, long in some and short in others, in order to construct a mean reversion portfolio.