arbitrage

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Arbitrage

The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Perfectly efficient markets present no arbitrage opportunities. Perfectly efficient markets seldom exist, but, arbitrage opportunities are often precluded because of transactions costs.

Arbitrage

An investment practice that attempts to profit from inefficiencies in price by making transactions that offset each other. For example, one may buy a security at a low price and, within a few seconds, re-sell it to a willing buyer at a higher price. Arbitrageurs can keep prices relatively stable as markets try to resist their attempts at price exploitation. Arbitrageurs often use computer programs because their transactions can be complex and occur in rapid succession.

arbitrage

The simultaneous purchase and sale of substantially identical assets in order to profit from a price difference between the two assets. As a hypothetical example, if General Electric common stock trades at $45 on the New York Stock Exchange and at $44.50 on the Philadelphia Stock Exchange, an investor could guarantee a profit by purchasing the stock on the Philadelphia Stock Exchange and simultaneously selling the same amount of stock on the NYSE. Of course, the price difference must be sufficiently great to offset commissions. Arbitrage may be employed by using various security combinations including stock and options and convertibles and stock. See also basis trading, risk arbitrage.

Arbitrage.

Arbitrage is the technique of simultaneously buying at a lower price in one market and selling at a higher price in another market to make a profit on the spread between the prices.

Although the price difference may be very small, arbitrageurs, or arbs, typically trade regularly and in huge volume, so they can make sizable profits.

But the strategy, which depends on split-second timing, can also backfire if interest rates, prices, currency exchange rates, or other factors move in ways the arbitrageurs don't anticipate.

arbitrage

the buying and selling of PRODUCTS, FINANCIAL SECURITIES or FOREIGN CURRENCIES between two or more markets in order to take profitable advantage of any differences in the prices quoted in those markets.

If the price of the same product is different, as between two markets, a dealer, by simultaneously buying in the lower-priced market and reselling in the higher-priced market, stands to make a profit on the transaction (allowing for dealing expenses). Arbitrage thus serves to narrow or eliminate price differentials between markets, with buying in the lower-priced market causing prices to rise there, and selling in the higher-priced market causing prices to fall. See SPOT MARKET, ARBITRAGEUR, SPECULATION, COVERED INTEREST ARBITRAGE.

arbitrage

the buying or selling of PRODUCTS, FINANCIAL SECURITIES or FOREIGN CURRENCIES between two or more MARKETS in order to take profitable advantage of any differences in the prices quoted in these markets. By simultaneously buying in a low-price market and selling in the high-price market a dealer can make a profit from any disparity in prices between them, though in the process of buying and selling the dealer will add to DEMAND in the low-price market and add to SUPPLY in the high-price market, so narrowing or eliminating the price disparity. See SPOT MARKET, FUTURES MARKET, COVERED INTEREST ARBITRAGE.

arbitrage

The simultaneous purchase in one market and sale in another market of a commodity, security,or monies,in the expectation of making a profit on price differences in the differing markets. Generally thought of as involving foreign currency exchanges,in which one enters contracts to buy euros and sell yen and hopefully make money in a moment in time when the exchange rates work out in one's favor (this is highly risky).

References in periodicals archive ?
Should Equation (2) hold then the arbitrage profit is equal to -[??] with the optimal proportion of the stake (Franck et al., 2009) being
In essence, this investigation measures the frequency and size of arbitrage opportunities embedded within Super Rugby betting.
Using the definition of arbitrage explained in the preceding section, the games either had an arbitrage opportunity or not.
Current Debates about CIRP Validity and Arbitrage Effectiveness
Japanese Yen" CIRP deviations have substantially lost their statistical significance since 2000, which implies the diminishing of covered interest arbitrage opportunities between the US and Japan.
(2011) test the CIRP validity for BRIC nations, showing that profitable arbitrage opportunities do exist in those emerging economies during the early 2000s, but remain very limited due to transaction costs and regulative policies in their currency and capital markets.
International tax arbitrage is one particular form of double non-taxation involving the exploitation of the conflict of rules in different jurisdictions.
Because the sole necessary condition for international tax arbitrage is a conflict between the tax laws of two countries, such conflicts between the laws of the United States and that of other countries can and do arise throughout the Internal Revenue Code (Code).
One example of the phenomenon of international tax arbitrage is the "dual resident company" (DRC).
Then trading assets or derivatives of assets like loan pools and cash flows or real estate equity can form the basis for an arbitrage opportunity.
Why does the inner city market need arbitrage? The basic reason is that inner city markets are volatile and this approach will even out the rapid changes in the neighborhoods that create both speculation and internal declines by dis-investment.
The arbitrage game has one essential rule: "It is not grave sin that the arbitrageur must shun, but grave risks" (Weisweiller, Rudi 1986).