This course focuses on arbitrage trading and pricing relationships in securities markets. The course emphasizes real-world examples analyzed through the lens of academic theory and empirical research. Class sessions will combine lectures, case studies, and active class participation. The required readings include several academic articles from leading finance journals along with lecture notes designed for the course. The course will explore various arbitrage strategies, including merger arbitrage, convertible arbitrage, closed-end fund arbitrage, dual-listed and dual-class arbitrage, SPAC arbitrage, government bond arbitrage, and CLOs. We will also discuss the role of hedge funds in their employment of arbitrage strategies and the financing of such strategies by Wall Street investment banks.
We will not have sufficient time to delve deeply into the more technical aspects of the arbitrage literature. The objective instead is to develop a strong conceptual understanding of arbitrage and its role in financial markets. The course is not designed to train professional arbitrageurs, nor to provide a step-by-step guide to arbitrage investing. Rather, the goal is to deepen your understanding of asset pricing, market efficiency, liquidity provision, and corporate finance.
