Capital structure arbitrageurs focus on individual issuers. They look for valuation differentials between a company's debt and equity securities.Arbitrage is the simultaneous purchase and sale of the same asset in different markets in order to profit from a difference in its price. Arbitrage is the strategy of taking advantage of price differences in different markets for the same asset. In the second part of this chapter, we will consider how firms should choose the right financing vehicle for raising capital for their investments. Exhibit 1 shows a typical CLO capital structure. There are two primary types of CLO structures: balance sheet and arbitrage. It consists of shareholders' equity, debt (borrowed funds), and preferred stock, and is detailed in the company's balance sheet. Investors who employ merger arbitrage strategies are known as arbitrageurs. MM hypothesis provides a behavioural justification of Proposition I in the form of Arbitrage Process.