ARBITRAGE

 

Arbitrage is a financial strategy that involves buying and selling the same or similar asset in different markets to profit from the differences in price between them[1][2][4][5][6]. Here are some key points related to arbitrage:

- The goal of arbitrage is to take advantage of market inefficiencies, such as temporary price differences, to make a profit[1][2][5].

- Arbitrage can be applied to various assets, including stocks, currencies, and commodities[1][4][5].

- There are different types of arbitrage, such as risk arbitrage, statistical arbitrage, and merger arbitrage[1][5].

- Risk arbitrage involves buying and selling securities in anticipation of a merger or acquisition[1][5].

- Statistical arbitrage involves using quantitative models to identify and exploit pricing discrepancies between securities[1][5].

- Merger arbitrage involves buying shares in companies prior to an announced or expected merger[1].

- The practice of arbitrage helps ensure that prices in competitive markets are very close[5].

- Arbitrage is considered a relatively low-risk exercise[2].

- The process of arbitrage can be used to generate income from trading a certain currency, security, or commodity in two different markets[4].

- Arbitrage can be risky if an investor takes advantage of better information or delays in the dissemination of prices[5].

- The theory of arbitrage pricing theory was developed by Stephen Ross in 1976[5].

Citations:

[1] investopedia

[2] investopedia

[3] study

[4] wallstreetmojo

[5] economicshelp

[6] indeed