2026-09-18T21:23:00Zhttps://dspace.mit.edu/server/oai/requestoai:dspace.mit.edu:1721.1/287382022-01-13T07:54:29Zcom_1721.1_7582com_1721.1_7581col_1721.1_131023
Leonid Kogan and John Tsitsiklis.
Naheta, Akshay, 1981-
Massachusetts Institute of Technology. Dept. of Electrical Engineering and Computer Science.
Massachusetts Institute of Technology. Department of Electrical Engineering and Computer Science
2005-09-27T18:04:15Z
2005-09-27T18:04:15Z
2004
2004
http://hdl.handle.net/1721.1/28738
59668924
Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Electrical Engineering and Computer Science, 2004.
Includes bibliographical references (leaves 59-60).
In this thesis we quantify the risk arbitrage investment process and create trading strategies that generate positive risk-adjusted returns. We use a sample of 895 stock swap mergers, cash mergers, and cash tender offers during 1998-2004Q2. We test the market efficiency hypothesis, and after accounting for transaction costs, we find that our risk arbitrage strategies generate annual risk-adjusted returns in excess of 4.5%. The research also obtains various other merger statistics, and relates them to a variety of economic indicators and merger timing models, as described in past work. We also estimate conditional probabilities of a merger's success, using a deal characteristic-driven prediction model, and combine it with market-implied probabilities. Our analysis suggests that the probability of success of a merger depends on a deal's characteristics. Further, it implies that one can improve on the market-implied estimates thereby creating trading opportunities. The analytical results achieved in this thesis can be used as the foundation for building an effective risk arbitrage trading platform.
by Akshay Naheta.
S.M.
60 leaves
2258460 bytes
2263896 bytes
application/pdf
application/pdf
en_US
Massachusetts Institute of Technology
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http://dspace.mit.edu/handle/1721.1/7582
Electrical Engineering and Computer Science.
Risk arbitrage : analysis and trading systems
Thesis
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