Arbitrageur

AAA

DEFINITION of 'Arbitrageur'

A type of investor who attempts to profit from price inefficiencies in the market by making simultaneous trades that offset each other and capturing risk-free profits. An arbitrageur would, for example, seek out price discrepancies between stocks listed on more than one exchange, and buy the undervalued shares on one exchange while short selling the same number of overvalued shares on another exchange, thus capturing risk-free profits as the prices on the two exchanges converge.

INVESTOPEDIA EXPLAINS 'Arbitrageur'

Arbitrageurs are typically very experienced investors since arbitrage opportunities are difficult to find and require relatively fast trading. Arbitrageurs also play an important role in the operation of capital markets, as their efforts in exploiting price inefficiencies keep prices more accurate than they otherwise would be.

VIDEO

RELATED TERMS
  1. Conversion Arbitrage

    An options trading strategy employed to exploit the inefficiencies ...
  2. Statistical Arbitrage

    A profit situation arising from pricing inefficiencies between ...
  3. Triangular Arbitrage

    The process of converting one currency to another, converting ...
  4. Negative Arbitrage

    The opportunity lost when municipal bond issuers assume proceeds ...
  5. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  6. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage ...
Related Articles
  1. What Is Market Efficiency?
    Active Trading

    What Is Market Efficiency?

  2. Top 4 Most Scandalous Insider Trading ...
    Investing Basics

    Top 4 Most Scandalous Insider Trading ...

  3. Arbitrage Squeezes Profit From Market ...
    Options & Futures

    Arbitrage Squeezes Profit From Market ...

  4. Trading The Odds With Arbitrage
    Options & Futures

    Trading The Odds With Arbitrage

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center