definitions Arbitrage

Arbitrage

The purchase of securities or commodities on one market for immediate resale on another in order to profit from a price discrepancy. A combination of transactions designed to profit from an existing discrepancy among prices, exchange rates, and/or interest rates on different markets without risk of these changing. Simplest is simultaneous purchase and sale of the same thing in different markets, but more complex forms include triangular arbitrage and covered interest arbitrage. It is finding two assets that are essentially the same, buying the cheaper, and selling the more expensive. The process of purchasing and selling foreign exchange, stocks, bonds and other commodities in several markets intending to make profit from the difference in price.