Definition of Arbitrage
What is Arbitrage
Arbitrage is a strategy that involves the simultaneous purchase and sale of the same or related securities across two or more markets to benefit from a discrepancy in their price relationship. The existence of arbitrage is due to market inefficiencies.
While the price differences are typically small and short-lived, the returns can be significant when traded in large volumes. Arbitrage is commonly leveraged by hedge funds and other sophisticated investors.
Types of Arbitrage
Glossary of Terms and Phrases
A financial dictionary or glossary is an essential tool to better understand the meaning of a specialized term or phrase. It would obviously make life much easier if everyone spoke the same language and used the same financial terms and phrases but that is not realistic.
We learn new languages to communicate with each other, transact business globally and to appreciate other cultures. Global finance is a specialized language that if understood and mastered, it will provide benefits that help to decrease risk and improve investment returns. Financial literacy is the foundation of developing good investment strategies and sound decision making.