- 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. The New York Times Financial Glossary
* * *
1. buying something such as a raw material or currency in one place and selling it immediately in another, in order to make a profit from price differences between the two places:• Analysts attributed the activity to arbitrage buying: traders bought cocoa in New York to sell at a profit in London.
2. buying and selling shares of two companies involved, or that may be involved, in a takeover, in order to make a profit from differences in the share values of the two companies:• The company incurred losses in risk arbitrage - or takeover-stock speculation - arising from last year's slump in U.S. merger activity.
exˈchange ˌarbitrageFINANCE a situation in which dealers can make a profit because of the temporary difference in the value between two currencies in relation to a third currency* * *
The action of profiting from the correction of price or yield anomalies in markets. Often this will involve taking a position in one market or instrument and an offsetting position in another. As prices or yields move back into line, all positions may be profitably closed out. An arbitrageur is an individual or institution practising arbitrage.* * *
arbitrage UK US /ˌɑːbɪˈtrɑːʒ/ US /ˈɑːrbɪtrɑːʒ/ noun [U] STOCK MARKET► the practice of buying something, such as shares or currency, in one place and selling them in another where you can get a higher price at the same time: arbitrage buying/selling »Traders said a rise in the peso's value made Mexican share prices more expensive compared with shares sold in New York and sparked some arbitrage selling.
»The importance of computers is that arbitrage opportunities can be quickly spotted and capitalized upon.
Financial and business terms. 2012.
