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Risk Arbitrage in the Swedish Market – Evaluation with Contingent Claims

Drott, Markus LU (2011) NEKM01 20111
Department of Economics
Abstract (Swedish)
The thesis analyses a risk arbitrage portfolio in Swedish equities over 2611 trading days (132 months), to evaluate the ability of a risk arbitrage strategy to generate excess returns, alpha, in the Swedish market. It is found that risk arbitrage generates a significant alpha of 120 basis points per month, in a linear model and assuming CAPM holds. In a contingent claims framework, aiming to correctly price non-linearities observed in previous studies, and assuming Black-Scholes holds, I find that the monthly alpha is 51 basis points per month.
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author
Drott, Markus LU
supervisor
organization
course
NEKM01 20111
year
type
H1 - Master's Degree (One Year)
subject
keywords
arbitrage, contingent claims, merger arbitrage, non-linear returns, risk arbitrage
language
English
id
1977405
date added to LUP
2011-06-16 14:39:09
date last changed
2011-06-16 14:39:09
@misc{1977405,
  abstract     = {The thesis analyses a risk arbitrage portfolio in Swedish equities over 2611 trading days (132 months), to evaluate the ability of a risk arbitrage strategy to generate excess returns, alpha, in the Swedish market. It is found that risk arbitrage generates a significant alpha of 120 basis points per month, in a linear model and assuming CAPM holds. In a contingent claims framework, aiming to correctly price non-linearities observed in previous studies, and assuming Black-Scholes holds, I find that the monthly alpha is 51 basis points per month.},
  author       = {Drott, Markus},
  keyword      = {arbitrage,contingent claims,merger arbitrage,non-linear returns,risk arbitrage},
  language     = {eng},
  note         = {Student Paper},
  title        = {Risk Arbitrage in the Swedish Market – Evaluation with Contingent Claims},
  year         = {2011},
}