Inward Arbitrage
Definition of 'Inward Arbitrage'A form of arbitrage involving rearranging a bank's cash by borrowing from the interbank market, and re-depositing the borrowed money locally at a higher interest rate. The bank will make money on the spread between the interest rate on the local currency, and the interest rate on the borrowed currency. |
|
Investopedia explains 'Inward Arbitrage'Inward arbitrage works because it allows the bank to borrow at a cheaper rate than it could in the local currency market. For example, assume an American bank goes to the Interbank market to borrow at the lower eurodollar rate, and then deposits those eurodollars at a bank within the US. The larger the spread, the more money that can be made. |
Related Definitions
Articles Of Interest
-
Trading The Odds With Arbitrage
Profiting from arbitrage is not only for market makers - retail traders can find opportunity in risk arbitrage. -
Top 7 Questions About Currency Trading Answered
Whether you're puzzled by pips or curious about carry trades, your queries are answered here. -
What is arbitrage?
Arbitrage is basically buying in one market and simultaneously selling in another, profiting from a temporary difference. This is considered riskless profit for the investor/trader. Here is an ... -
The Art Of Speculation
Speculators believe that the market overreacts to a host of variables. These variables present an opportunity for capital growth. -
Arbitrage
Learn more about this trade that profits from price differences between financal instruments and markets. -
Making Sense Of The EUR/CHF Relationship
The strong correlation between EUR and CHF currency pairs is undeniable. Find out what it means for forex traders. -
Asset-Backed Commercial Paper Carries High Risk
Asset-backed commercial paper has characteristics that make it much more risky than traditional commercial paper. -
What is the difference between arbitrage and speculation?
Arbitrage and speculation are very different strategies. Arbitrage involves the simultaneous buying and selling of an asset in order to profit from small differences in price. Often, arbitrageurs ... -
Hedge Fund Failures Illuminate Leverage Pitfalls
Learn what mistakes cause hedge funds to collapse and how to avoid similar problems. -
How To Invest Like A Hedge Fund
Hedge funds earn big returns for investors. Find out how they do it and whether you can too.
Free Annual Reports