higher than or in-line with the odds offered by the market. Short sell Company A's stock at $70. They would do this if he believes the probability that the deal will be terminated is higher than the odds offered by the market. If the arbitrageur believes the probability the deal will be occur is greater than 50% (that is, they believe the acquisition will still occur) but less than the probability assigned by the market (say, 60% in this example), they must also assume that the market will assign a probability of deal occurrence closer to their belief at some point before the close of the acquisition. Do not get involved in the deal at this point in time. References External links Risk Arbitrage - Risk Encyclopedia Arbitrage Financial markets Hedge funds