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On the look-out for a white knight: options-based calculation of probability and expected value of increased bids in hostile takeover battles

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  • Stefan Eichler
  • Dominik Maltritz

Abstract

Takeover bids provide an option right to the target's shareholders; they guarantee the offered price but maintain the chance of higher offers. Using Option Pricing Theory (OPT) we estimate the probability and expected value of higher bids from target stock prices.

Suggested Citation

  • Stefan Eichler & Dominik Maltritz, 2010. "On the look-out for a white knight: options-based calculation of probability and expected value of increased bids in hostile takeover battles," Applied Economics Letters, Taylor & Francis Journals, vol. 17(11), pages 1033-1036.
    • Handle: RePEc:taf:apeclt:v:17:y:2010:i:11:p:1033-1036
    DOI: 10.1080/00036840902817466
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    References listed on IDEAS

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