Which of the Following Statements Regarding Risk Arbitrage Is FALSE

question 8

Multiple Choice

Which of the following statements regarding risk arbitrage is FALSE?

• A)Once a tender offer is announced,the uncertainty about whether the takeover will succeed reduces the volatility of the stock price.This uncertainty creates an opportunity for investors to speculate on the outcome of the deal without bearing the risk of volatility.
• B)Traders known as risk-arbitrageurs,who believe that they can predict the outcome of a deal,take positions based on their beliefs.
• C)A potential profit arises from the difference between the target's stock price and the implied offer price,and is referred to as the merger-arbitrage spread.
• D)It is not true arbitrage because there is a risk that the deal will not go through.If the takeover did not ultimately succeed,the risk-arbitrageur would eventually have to unwind his position at whatever market prices prevailed.

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Definitions:

Physical Aspects

The tangible and environmental attributes or conditions of a workplace that can affect the well-being and performance of employees.

Adaptive Response

The ability of an organism or organization to modify or change its behavior or processes in response to changes in its environment.

Psychological Demands

The cognitive and emotional requirements or stressors associated with a job role.

Exhaustion

A state of extreme physical or mental fatigue, often resulting from stress or overwork.