arbitrage
An investor uses arbitrage to profit from price differences between two markets.
Noun:
- A financial strategy involving simultaneous buying and selling: "Arbitrage" refers to the practice of buying an asset in one market and immediately selling it in another market at a higher price to profit from a temporary price difference. It is considered a risk-mitigated investment because the trades are executed concurrently.
- The price difference itself: In finance, "arbitrage" can also refer to the price discrepancy between two or more markets that creates such a profit opportunity.
Verb:
- To engage in arbitrage: The act of executing simultaneous trades to profit from price differences in different markets.
Noun:
- The trader identified an arbitrage opportunity between the London and New York stock exchanges.
- Risk-free arbitrage is rare because markets are usually efficient.
Verb:
- Hedge funds often arbitrage discrepancies in currency exchange rates.
- They attempted to arbitrage the price difference for gold between the two commodity exchanges.
"Pure arbitrage": A theoretical, risk-free form of arbitrage where the profit is locked in at the moment the trades are placed, with no capital at risk.
- Pure arbitrage is more of a financial theory than a common practice due to transaction costs.
"Regulatory arbitrage": Exploiting differences in rules or regulations between two markets or jurisdictions.
- The bank engaged in regulatory arbitrage by moving operations to a country with looser financial laws.
"Statistical arbitrage": A quantitative trading strategy that uses mathematical models to identify and exploit temporary price inefficiencies between related securities.
- Their fund's success is based on complex algorithms for statistical arbitrage.
Arbitrageur (n): A person or entity that engages in arbitrage.
- The arbitrageur acted quickly to capitalize on the fleeting price gap.
Arbitraging (gerund/n): The activity or process of conducting arbitrage.
- Arbitraging requires sophisticated technology to execute trades in milliseconds.
- Riskless profit: (Concept) A gain achieved with no risk, which is the ideal outcome of an arbitrage transaction.
- Spread trading: (Strategy) A related strategy that involves taking offsetting positions to profit from a change in the price difference (spread).
"Arbitrage away": (Phrasal verb) The process by which arbitrage activity eliminates a price discrepancy, making the market more efficient.
- Traders will quickly arbitrage away any significant price difference between the two markets.
"Arbitrage opportunity": (Common phrase) A situation where arbitrage is possible.
- The software scans multiple markets in real-time to detect arbitrage opportunities.
- "A money machine": (Informal idiom) Sometimes used to describe a highly successful, low-risk arbitrage operation, though it implies consistent, easy profits.
- Before the markets corrected, that currency trade was like a money machine for arbitrageurs.
An investor uses arbitrage to profit from price differences between two markets.
- a kind of hedged investment meant to capture slight differences in price; when there is a difference in the price of something on two different markets the arbitrageur simultaneously buys at the lower price and sells at the higher price
- practice arbitrage, as in the stock market