Merger arbitrage, also known as risk arbitrage, is a trading strategy that capitalizes on the price discrepancies that occur before and after mergers and acquisitions (M&A) are announced. This investment strategy involves buying and selling the stocks of two merging companies to exploit price movements that occur due to the merger. In this comprehensive guide, we will delve into the intricacies of merger arbitrage, examining its definition, strategy, risks, and opportunities. We’ll also look at examples, analysis techniques, and how merger arbitrage funds operate. This guide aims to provide you with an in-depth understanding of this sophisticated investment approach, helping you make informed decisions and optimize your portfolio.