Arbitrage is a term that is commonly used in finance and economics. It is a concept that refers to the practice of buying and selling assets in different markets in order to take advantage of price differences. In this article, we will explore the meaning and definition of arbitrage, its origin, and its associations.
Definitions
Arbitrage is defined as the practice of buying and selling assets in different markets in order to take advantage of price differences. This can be done with any type of asset, including stocks, bonds, currencies, and commodities. The goal of arbitrage is to make a profit by buying an asset in one market and selling it in another market where the price is higher.
Origin
The word “arbitrage” comes from the French word “arbitrer,” which means to judge or decide. The term was first used in the 18th century to describe the practice of judges who would make decisions based on their own personal biases. Later, the term was adopted by the financial industry to describe the practice of buying and selling assets in different markets to take advantage of price differences.
Meaning in different dictionaries
According to the Oxford English Dictionary, arbitrage is “the simultaneous purchase and sale of securities or other assets in different markets or in derivative forms in order to profit from the difference in their prices.”
The Merriam-Webster Dictionary defines arbitrage as “the purchase of a security, commodity, or foreign currency in one market for immediate resale in another market in order to profit from a price discrepancy.”
Associations
Arbitrage is often associated with the financial industry and is used by traders, investors, and hedge funds to make profits. It is also associated with risk-taking, as there is always a chance that the price difference between markets will not be large enough to make a profit.
Synonyms
Some synonyms of arbitrage include speculation, trading, and investing.
Antonyms
Antonyms of arbitrage include holding, retaining, and keeping.
The same root words
The word “arbitrage” comes from the French word “arbitrer,” which means to judge or decide. Other words that share this root include arbitration, arbitrator, and arbitrary.
Example Sentences
- The hedge fund manager made a profit through arbitrage by buying stocks in one market and selling them in another at a higher price.
- The trader used arbitrage to take advantage of the price difference between the stock market and the futures market.
- Some investors use arbitrage as a way to diversify their portfolios and reduce risk.