Institutional Background

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Merger arbitrageurs are position takers who evaluate the probability of

mergers breaking apart and study the size of loss that might result. They are
prototypical forecasters of events with generally little concern for market
price swings prior to the occurrence of the event.
For further reading on the economics and institutional structure of market making and position taking, a book I would recommend very highly is
Harris (2003). Anyone involved in risk management should attempt to gain
insight into how risk management is viewed by traders. While friendship
and conversation are the best way to approach this, it is also helpful to read
about risk management from a traders perspective. The best book of this
type I have encountered is Brown (2012).