Arbitrage simply means finding two things that are essentially the same and buying cheaper and selling or selling short, the more expensive.
It refers to a trading strategy based on the purchase of a commodity, including foreign exchange, in one market at one price while simultaneously selling it in another market at a more advantageous price, in order to obtain a risk-free profit on the price differential.
According to new business dictionary,” Arbitrage is a swapping or switching overfunds from one investment to another, taking advantage of the differentials and so to maximize gains.”
Arbitrage can be loosely defined as capitalizing on a discrepancy in quoted prices by making a riskless profit. In many cases, the strategy does not require an investment of funds to be tied up for length of time does not involve any risk.
Arbitrage refers simultaneous purchase and sale of identical or equivalent financial instruments or commodity futures so as to benefit from difference in their price relationship.
Arbitrage is the making of a profit from the difference in value of various assets. Means include: selling foreign currencies or commodities on one market and buying on another at almost the same time to profit from different exchange rates; buying currencies forward and selling them forward at a later date, to benefit from a difference in prices; buying a security and selling another security to the same buyer with the intention of forcing up the value of both securities.
Webster Dictionary Meaning
- A traffic in bills of exchange (see Arbitration of Exchange); also, a traffic in stocks which bear differing values at the same time in different markets.
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