Market Arbitrage

AAA

DEFINITION of 'Market Arbitrage'

Purchasing and selling the same security at the same time in different markets to take advantage of a price difference between the two separate markets.

INVESTOPEDIA EXPLAINS 'Market Arbitrage'

An arbitrageur would short sell the higher priced stock and buy the lower priced one. The profit is the spread between the two assets.

VIDEO

RELATED TERMS
  1. Short Selling

    The sale of a security that is not owned by the seller, or that ...
  2. Telecom Arbitrage

    An arbitrage strategy used by telecommunications companies that ...
  3. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  4. Rational Pricing

    A financial theory that contends that the market prices of assets ...
  5. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  6. Arbitrage Trading Program - ATP

    A computer program used to place simultaneous orders for stock ...
Related Articles
  1. Forex Education

    The Greatest Currency Trades Ever Made

    These speculators took big positions - and scored huge profits - in the currency market.
  2. Options & Futures

    Trading The Odds With Arbitrage

    Profiting from arbitrage is not only for market makers - retail traders can find opportunity in risk arbitrage.
  3. Fundamental Analysis

    What are the components of shareholders' equity?

    Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business.
  4. Bonds & Fixed Income

    What is the difference between the yield of stock and the yield of a bond?

    Explore and understand the various meanings of the investment term "yield" as it is applied to equity investments and bond investments.
  5. Bonds & Fixed Income

    Why are bond yields calculated in terms of basis points?

    Find out why financial analysts and publications track and quote bond yields in basis points, or bps, rather than simply stating percentages.
  6. Investing Basics

    What is the Stock Market?

    A stock market is where shares in corporations are issued and traded. Stock markets are key components of a free market economy.
  7. Investing

    Commercial Paper

    Commercial paper is a short-term debt security issued by financial companies and large corporations. The corporation promises the buyer a return, or profit, for making the loan. The return is ...
  8. Brokers

    Arbitrage Opportunities in Spread Betting

    While the opportunities are few and far between, investors may use arbitrage to take advantage of price differences in financial spread betting.
  9. Investing Basics

    What is the difference between a company's outstanding shares and its float?

    Understanding share counts, including outstanding shares relative to float, is an integral part of determining whether or not to invest in a particular company.
  10. Investing Basics

    What is the difference between authorized shares and outstanding shares?

    Calculating financial ratios can help investors understand a company's financial position, but only when a knowledge of various terms is at the foundation.

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center