Riskless arbitrage

(redirected from Riskless Profit)

Riskless arbitrage

The simultaneous purchase and sale of the same asset to yield a profit.

Riskless Arbitrage

The act of buying an asset and immediately selling the same asset for a higher price. For example, one may execute two orders at once, one to buy a security at $10 and one to sell the same security at $12. The short time frame involved means that riskless arbitrage occurs without investment; there is no rate of return or anything like it because the asset is immediately sold. One simply makes a profit on the deal.
References in periodicals archive ?
For example, if long-term interest rates are higher than the risk-adjusted, expected short-term interest rates averaged over the time to maturity, investors can gain riskless profit by buying long-term bonds and selling short-term bonds.
When banks are given the freedom to choose, they choose riskless profit or even financial speculation over lending that would support the broader objective of economic growth.
They may buy the shares on the NYSE at a lower price and sell them in the German capital markets at a higher price for a riskless profit.
If any mispricing is observed, a riskless profit can be generated by dynamic hedging approach that consists of creating risk-neutral hedge positions i.
Arbitrage as an idea is comparatively simple: it involves buying something "cheap" in one market and simultaneously (or nearly simultaneously) selling it "dear" in another, making a riskless profit from the price difference.
Even after paying ` 500 as borrowing cost, we will generate ` 1,500 as riskless profit.
Even after paying Rs 500 as borrowing cost, we will generate Rs 1,500 as riskless profit.
The banks use this borrowed capital to buy guaranteed government debt, taking the difference in yields as riskless profit.
This paper will lay out those barriers, provide the model for riskless profit generation, provide real world examples of where the theory has become reality and provide easy next steps for the reader.
Since consumers can earn a riskless profit by buying indexed bonds, they hold money and nominal bonds only if they are compensated for monetary or inflation risk.
ARBITRAGE: In finance theory, arbitrage is a riskless profit, like finding a $20 bill on the sidewalk.
1951, one could make a riskless profit by selling the option and holding 1/2 shares of the stock.