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What is the difference between arbitrage and hedging?

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Question ajoutée par Osama Raslan , Head of Financial Accounting & Payables , Alexandria Fertilizers Co
Date de publication: 2017/03/21
Majed Alali
par Majed Alali , Lawyer & Legal Adviser , AL-Fadda Law Firm

Arbitrage is the simultaneous purchase and sale of equivalent assets at prices which guarantee a fixed profit at the time of the transactions.

Hedging is the simultaneous purchase and sale of two assets in the expectation of a gain from different subsequent movements in the price of those assets. Usually the two assets are equivalent in all respects except maturity.

Khaliq Raza MBA   MS   CFE  AFA
par Khaliq Raza MBA MS CFE AFA , Finance Manager , Vertex Trading

Arbitrage simply the price difference between different markets of same things, so people earn profit due to the non symmetric information of consumers. Hedging is the investment in different securities to offset the risk with zero correlation. Thanks 

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