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Research Details
Speculating on an acquisition with options: Rjr nabisco
Abstract
This case provides a detailed practical example of some interesting option pricing issues arising from a tender offer for RJR Nabisco by KKR. Put-call parity was apparently violated during this period, but this was related to the specifics of the takeover offer. This case focuses on two issues: understanding the nature of the parity violation and why it could not have been arbitrated in the classical sense, and how a particular options trading strategy could have been used to speculate on the success of the KKR tender offer.
Type
Case
Author(s)
Date Published
1996
Citations
McDonald, Robert L.. 1996. Speculating on an acquisition with options: Rjr nabisco. Casenet, Southwestern Publishing.