Arbitrage (Noun)
Meaning
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.
Classification
Nouns denoting acts or actions.
Examples
- The hedge fund manager made a fortune through arbitrage, buying undervalued stocks on the Tokyo exchange and selling them at a markup on the New York exchange.
- Arbitrage opportunities often arise when there are differences in tax laws or regulatory environments between two markets.
- The trader's arbitrage strategy involved buying bonds at a discount on the secondary market and selling them at face value on the primary market.
- By exploiting the price difference between the two exchanges, the arbitrageur was able to earn a risk-free profit without actually taking on any market risk.
- The rise of electronic trading platforms has made it easier for individuals to engage in arbitrage, but it has also increased competition and reduced profit margins.