Which of the following is an example of an event-driven strategy?

An event-driven strategy focuses on taking advantage of specific events that can influence the value of a security. Merger arbitrage is a classic example of this type of strategy. In merger arbitrage, investors look to profit from the price discrepancies that occur due to anticipated corporate actions, such as mergers or acquisitions.

When one company announces a merger with another, typically, the stock price of the target company rises, while the acquirer’s stock may fall or remain stable. Investors who employ a merger arbitrage strategy will buy shares of the target company and often short shares of the acquirer, betting that the deal will go through and that the target's share price will align with the agreed acquisition price, leading to a profit when the merger is completed.

This strategy is distinctly based on specific events (the merger), setting it apart from options like value investing or index fund investment, which are based on broader market movements or long-term growth strategies rather than individual events impacting security prices. Similarly, while a market neutral strategy may involve various positions to mitigate risk, it does not explicitly hinge on events like mergers or acquisitions. Therefore, merger arbitrage perfectly exemplifies the principles of an event-driven strategy.