This is a process of purchasing stocks, bonds, foreign exchange and other merchandise in a market and instantly selling them in another market.

Arbitrage, in economics and finance, Is the method of taking advantage of a cost difference between several different markets: discovering that a combination of matching deals which capitalize upon the imbalance, the profit being the difference between the market fees.

This is typically buying a bond in 1 market and immediately selling it in another market at a higher price, profiting from the momentary difference in price rates. This is considered an absolutely safe profit for the investor/trader.

In the context of the stock market, Merchants often attempt to exploit arbitrage opportunities. For example, a trader can buy a stock on a foreign market at which the price hasn’t yet adjusted for the constantly shifting exchange rate. The fee of the stock on the overseas market is therefore undervalued compared to the cost on the foreign exchange, And the trader can make a profit from this gap.

Click to rate this post!
[Total: 0 Average: 0]