This paper analyses risk arbitrage in U.S. financial markets. The study by Mitchell, Mark and Todd Pulvino (2001) has been extended to study the U.S. financial markets scenario from 1963 to 2004. In particular, two research questions are pursued-(1) What are the effects of stock market, business conditions as well as the Merger and Acquisition Trend on risk arbitrage activities in the U.S (2) What is the current trend and effect of the U.S. financial regulatory mechanism on risk arbitrage? The results of the paper are: 1)Returns associated with risk arbitrage are more pronouncedly decreased in down/severely depreciating stock market and business conditions especially when there is possibility of deal failure but remain rather uncorrelated with market returns when the market is flat and appreciating. 2)The probability of a merger failing is a decreasing function of market returns in the last two months, indicating that deals are more likely to fail following market downturns. 3)There has also been a growing trend in US financial market regulatory mechanism to reduce systemic risk, eliminate legal uncertainty, control regulatory arbitrage and to have a closer look on derivatives trading which could be potentially used for fraud or manipulation. The current focus of the financial regulatory mechanism is to curb illegal trading in risk arbitrage activities through limits on trading volume and control of regulatory arbitrage opportunities which should continue into the future.