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What is meant by "Arbitrage" ? Where these kind of transactions are liberally used and popularly known for?

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Question ajoutée par VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.
Date de publication: 2014/09/24
SREEDEVI SUNILKUMAR
par SREEDEVI SUNILKUMAR , Business finance officer , Emirates Airline

The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time.

Vinod Jetley
par Vinod Jetley , Assistant General Manager , State Bank of India

Given the advancement in technology it has become extremely difficult to profit from mispricing in the market. Many traders have computerized trading systems set to monitor fluctuations in similar financial instruments. Any inefficient pricing setups are usually acted upon quickly and the opportunity is often eliminated in a matter of seconds. Arbitrage is a necessary force in the financial marketplace.

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