Merger Arbitrage Risk Model
Pictet Asset Management; RiskMetrics Group
February 1, 2007
A traditional VaR approach is not suitable to assess the risk that merger arbitrage funds carry in their portfolios. We propose a simple two-state or three-state model that captures the risk characteristics of the deals in which merger arbitrage funds invest.This model has been tested on a set of mergers and acquisitions between large US public companies in 2005.
Number of Pages in PDF File: 13
Keywords: Merger arbitrage, risk measurement
JEL Classification: Cworking papers series
Date posted: February 6, 2010
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