Entity: ARBITRAGE
Arbitrage is the practice of taking advantage of price differences in two or more markets to profit from the temporary discrepancies. It involves buying a security in one market and selling it in another at a higher price.
ARBITRAGE
Etymology
The term 'arbitrage' originates from the French word 'arbitrer,' meaning to judge or consider. It entered the English language in the 19th century.
Definition
Arbitrage is the practice of taking advantage of price differences in two or more markets to profit from the temporary discrepancies. It involves buying a security in one market and selling it in another at a higher price.
Historical Context
Arbitrage has been a common practice in financial markets for centuries. Traders seek to capitalize on inefficiencies in pricing to generate profits.
Cultural Significance
Arbitrage plays a crucial role in maintaining market efficiency by ensuring that prices align across different markets. It also provides opportunities for traders to profit from market anomalies.
Related Concepts
- Statistical Arbitrage: Utilizes quantitative models to identify pricing inefficiencies in related assets.
- Risk Arbitrage: Involves exploiting price discrepancies in securities due to pending mergers or acquisitions.
See Also
The act of exploiting price differences in various markets to make a profit.