what then does an arbitrageur do let s first look at merger arbitrage which has been behind the plots of several hollywood movies over the years 
also known as risk arbitrage merger arbitrage involves capitalizing on the price difference between the stock price of a target company and the offer price from an acquiring company when mergers are announced the target company s stock price usually trades for less than the offer price reflecting uncertainty or risk factors related to the deal arbitrageurs will often strike at this point thinking that the merger is likely to be approved and the target company s stock price will eventually converge with the offer price they take advantage of this price gap by buying the target company s stock at the lower market price and then selling it at the higher offer price when the deal is closed 6once a merger or acquisition is announced arbitrageurs track down detailed information about the transaction they are somewhere between financial researchers and investigative reporters if they only reported to one firm the arbitrageur is sorting out whether the deal will go through their initial step often includes obtaining the annual and quarterly reports and 10 k filings of the involved companies to assess their financial health the better the financial health of the firms the more likely the deal is to be completed arbitrageurs compile research from brokerage firms about both companies and their industries online databases and services have significantly streamlined this process they also want to understand the industry and the rationale behind the deal a strategically sound merger is not only a valuable addition to a portfolio but also more likely to close notable arbitrage opportunities were created by at t time warner announced 2016 closed 2018 and disney fox mergers announced 2017 closed 2019 both mergers faced legal challenges and regulatory scrutiny because of concerns about media consolidation those delays meant that arbitrageurs were following each step a court case here a regulatory ruling there as they calculated and recalculated the likelihood these deals would get done often arbitrageurs are financial generalists so they must be a quick study as they might spend one day on a deal for two manufacturing firms and the next on natural gas companies with complicated details about proven reserves and pipelines near the black sea 5 at each turn arbitrageurs are trying to figure out the potential return for their firm the risk and the likelihood that the deal will be completed only then can the arbitrageur determine what stocks to buy and what strategies are needed to hedge if the deal goes south here s what could go wrong in the time between when a deal is announced and when it s closed 1looking out for these risks makes merger arbitrage an ongoing process arbitrageurs may be in the courtrooms of delaware where most u s companies are domiciled following the ups and downs of cases there alternatively they might be keeping a close eye on global economic indicators and regulatory changes that could affect the success of a deal arbitrageurs are also constantly calling industry experts legal advisors and other arbitrageurs to stay updated on any developments market trends and changes in investor sentiment that mean they need to alter their strategies 6arbitrage for cross market price differenceshere are some ways that arbitrageurs try to profit from the price differences that can appear across different markets 