Final answer:
A professional who searches for mispriced securities in specific areas such as merger-target stocks, rather than one who seeks strict (risk-free) arbitrage opportunities is engaged in risk arbitrage.
Step-by-step explanation:
A professional who searches for mispriced securities in specific areas such as merger-target stocks, rather than one who seeks strict (risk-free) arbitrage opportunities is engaged in risk arbitrage.
Risk arbitrage involves identifying and investing in securities that are involved in events such as mergers, acquisitions, or restructurings, where there is potential for a price discrepancy between the current market value and the expected future value of the securities.
This strategy involves taking on some level of risk, as there is uncertainty surrounding the outcome of the event, but the potential for higher returns.