merger-arb

What problem does it solve?

This Skill provides a rigorous, end-to-end framework for analyzing merger arbitrage and event-driven corporate actions by decomposing spreads into edge components and translating qualitative risk assessments into quantitative probabilities.

Core Features & Use Cases

• Spread decomposition: compute gross and annualized spreads, separate deal-break, time value, financing cost, and residual market risk components.
• Probability & EV modeling: estimate P(close), extract market-implied probability, compute edge, and evaluate expected value under multiple scenarios.
• Sizing, hedging & structures: apply Kelly sizing for binary outcomes, model stock-for-stock hedges, and handle complex structures (CVR, collars, spin-offs, activist campaigns, tender offers, rights issues).
• Portfolio planning & risk controls: assemble a diversified event book (20-40 positions), perform stress tests, monitor correlation and beta, and enforce portfolio constraints.
• Trade-ticket generation: produce standardized event-driven trade tickets with deal terms, risk scores, sizing, hedges, milestones, and monitoring timelines.

Quick Start

Analyze a newly announced deal using the full framework, decompose the spread, score risk factors, size with Kelly, model hedges, and generate a trade ticket.