important in merger arbitrage, where deal failure is a key risk. In this paper, I propose a dynamic asset pricing model that … addition, the model accurately predicts that merger arbitrage exhibits low volatility and a large Sharpe ratio when deals are …

We study both theoretically and empirically option prices on firms undergoing a cash merger offer. To estimate the … merger's success probability, we use a Markov Chain Monte Carlo (MCMC) method using a state space representation of our model …. Our estimated probability measure has significant predictive power for the merger outcome even after controlling for …

acquirer that makes a merger profitable to both the acquirer and the target. We show the existence of an optimal timing and … terms, depending on the profit flows at the time of the merger. In addition, we analytically and numerically explore when …