IQ Merger Arbitrage ETF

What are the components of a risk arbitrage spread? There are a number of factors that figure into a trade. Let’s look at a typical cash deal first.

Not all deals are cash deals, however. Often companies will issue stock in lieu of giving cash for a deal. This adds a layer of complication to the process and also some risk factors we need to consider.

Merger arbitrage, otherwise known as “risk arbitrage,” is an investment strategy that primarily focuses on mergers and capturing the spreads on announced deals.