Which of the following statements regarding risk arbitrage is FALSE?

A. A potential profit arises from the difference between the target's stock price and the implied offer price, and is referred to as the

mergerarbitrage spread.

B.It is not true arbitrage because there is a risk that the deal will not go through. If the takeover did not ultimately succeed, the

riskarbitrageur would eventually have to unwind his position at whatever market prices prevailed.

C. Once a tender offer is announced, the uncertainty about whether the takeover will succeed reduces the volatility of the stock price. This uncertainty creates an opportunity for investors to speculate on the outcome of the deal without bearing the risk of volatility.

D.Traders known as riskarbitrageurs, who believe that they can predict the outcome of a deal, take positions based on their beliefs.