BNET Business Dictionary
Business Definition for: Arbitrage
- the buying and selling of foreign currencies, products, or financial securities between two or more markets in order to make an immediate profit by exploiting the differences in market prices quoted
Wiktionary Definition for: Arbitrage
- the practice of quickly buying and selling foreign currencies in different markets in order to make a profit
- the purchase of the stock of a future takeover target, with the expectation that the stock will be sold to the person executing the takeover at a higher price
- any market activity where a commodity is bought and sold quickly for a profit which far exceeds the transaction cost
Additional Resources
- How Prevalent is Tax Arbitrage?
- Although tax arbitrage is central to the literatures on tax capitalization, implicit taxes, and even capital structure, there is little empirical evidence of the extent to which firms actually engage in tax arbitrage. This paper provides some evidence on the topic by focusing on a simple and observable corporate arbitrage...
- White papers 2002-08-07
- Risk Arbitrage
- Risk arbitrage is one of several styles of hedge fund investing that constitutes the event driven strategy. Event driven investing is a strategy that seeks to profit from special situations or opportunities to capitalize on price fluctuations or imbalances. It is generally equity-oriented investing designed to capture share price movement...
- White papers 2001-11-01
- Limited Arbitrage in Mergers and Acquisitions
- A diversified portfolio of risk arbitrage positions produces an abnormal return of 0.6–0.9% per month over the period from 1981 to 1996. It trace these profits to practical limits on risk arbitrage. In the model of risk arbitrage, arbitrageurs' risk-bearing capacity is constrained by deal completion risk and the size...
- White papers 2001-06-01
- Risks in Hedge Fund Strategies: Case of Convertible Arbitrage
- Using data on Japanese and US convertible bonds and underlying stocks, it analyzes the risk return characteristics of convertible arbitrage funds. The hypothesize that there are three primitive trading strategies that explain convertible arbitrage funds, returns, positive carry, volatility arbitrage, and credit arbitrage. They are referred as asset-based style factors....
- White papers 2004-09-16
- IndexIQ Planning First Merger Arbitrage ETF
- Michael Johnston submits: IndexIQ, a pioneer in the area of hedge fund and inflation hedge ETFs, is preparing to launch another fund, the IQ ARB Merger Arbitrage ETF. The fund is scheduled to begin trading later this month under the clever ticker MNA. The proposed ETF will track the IQ...
- External links 2009-11-05
- Arbitrage-Free Price Ranges for nth-to-Default Swaps
- The arbitrage-free range of values of the loss leg of an nth-to-default swap, and the arbitrage-free range of premium payments for such a swap, are derived for homogeneous baskets of arbitrary numbers of reference entities. Elementary arbitrage arguments are given which show that arbitrage opportunities exist if the prices lie...
- White papers 2004-11-29
- Merger Arbitrage: Evidence of Profitability
- Merger arbitrage is widely considered one of the principal areas of hedge fund investment. While the investment process of merger arbitrage is generally known, less information exists, at least in the practitioner community, as to academic research as to the basis for various merger activity as well as to the...
- White papers 2003-01-01
- Merger Arbitrage Funds: Do They Deliver What They Promise?
- Capital Market Risk Advisors CMRA has recently completed a detailed fundamental analysis of the merger arbitrage strategy. This was accomplished by creating the "theoretical" performance of a "pure" merger arbitrage strategy. The major conclusions were divided in two parts. Firstly, the majority of merger arbitrage managers achieved their returns by...
- White papers 2003-01-01
- Reducing Market Risk With Merger Arbitrage
- After a company announces intent to acquire another, the price of the target company's stock predictably goes up, although usually not to the full offering price. Instead, because of the risk of the deal not closing on time or at all, the target company's stock will sell at a discount...
- White papers 2003-01-01
- Risk and Return in Fixed Income Arbitrage: Nickels In Front of a Steamroller?
- This paper has conducted an analysis of risk and return characteristics of fixed income arbitrage. It shows that a widely-used fixed income arbitrage strategy based on swap spreads generates sizable positive excess returns over an extended period. The findings shows, that most of these excess returns represent compensation for risk;...
- White papers 2004-04-01
- Trading the Odds With Arbitrage
- Arbitrage, in its purest form, is defined as the purchase of securities on one market for immediate resale on another market in order to profit from a price discrepancy. This results in immediate risk-free profit. Arbitrage is a very broad form of trading that encompasses many strategies; however, they all...
- White papers 2004-11-10
- How Prevalent Is Tax Arbitrage? Evidence From the Market for Municipal Bonds
- Although tax arbitrage is central to the literatures on tax capitalization, implicit taxes, and even capital structure, there is little empirical evidence of the extent to which firms actually engage in tax arbitrage. This paper provides some evidence on the topic by focusing on a simple and observable corporate arbitrage...
- White papers 2002-08-01
- Merger Arbitrage Opportunity: Pfizer - Wyeth
- Asif Suria submits: If you are familiar with merger arbitrage, please feel free to skip straight ...
- External links 2009-03-08
- News: GAM takes arbitrage idea global.(Global Asset Management to launch GAM Multi-Arbitrage Fund)(Brief Article)
- Global Asset Management GAM, a UK-based multi-manager, is to launch a multi-arbitrage fund this month. The GAM Multi-Arbitrage Fund aims to achieve long-term capital appreciation with low volatility and low or negative correlation to equity or bond markets. The fund will...
- Research articles 2002-09-23
- What's Driving the Growth of BPO? The Impact of Labor Arbitrage - I
- To the casual observer, the fundamental sources of leverage - technology, best practices, and scale -- that were behind the growth of IT outsourcing are now driving the pace of BPO outsourcing. However, a deeper look reveals that the primary driver is the combination of labor arbitrage with these leverage...
- White papers 2002-11-01
- Expanding The Limits Of Merger Arbitrage
- The term arbitrage denotes the simultaneous purchase and sale of identical assets in order to profit from a price difference between the two assets. The perfect case of arbitrage occurs when there is no risk involved and no capital is required. During merger and acquisition process, professional risk arbitragers purchase...
- White papers 2003-05-18
- Capital Structure Arbitrage Strategies: Models, Practice and Empirical Evidence
- Capital structure arbitrage strategies currently are the fastest growing sector in the hedge fund market and in proprietary trading departments in large banks. The objective of the thesis is the theoretical and practical background of capital structure arbitrage and hedging strategies, and the empirical evidence of key relationships applying these...
- White papers 2003-11-01
- News: Hewitt seals purchase of France's Finance Arbitrage.(Hewitt Associates L.L.C.)(Finance Arbitrage)(Brief Article)
- Hewitt Associates has extended its European consultancy business with the purchase of leading French player Finance Arbitrage for an undisclosed sum. Hewitt Associates has extended its European consultancy business with the purchase of leading French player Finance Arbitrage for an undisclosed sum.
- Research articles 2002-08-12
- Bear Stearns Introduces The Bear Stearns Risk Arbitrage Cash Deal Index—A New Way to Participate in Risk Arbitrage
- NEW YORK -- Bear, Stearns & Co. Inc. today announced that it recently launched The Bear Stearns Risk Arbitrage Cash Deal Index (Bloomberg: BSEICASH <Index>)--a new way to gain exposure to risk arbitrage deals in the US. The index, created by the Bear Stearns Equity Linked Strategy Team, is composed...
- Research articles 2007-09-11
- How Effective Is Arbitrage of Foreign Stocks? The Case of the Malaysia Exchange-Traded Fund
- ABSTRACT: Unlike closed-end country funds that usually trade at large premiums to the values of their portfolios, exchange-traded funds facilitate arbitrage to prevent their prices from deviating from their underlying values. However, such arbitrage can involve significant transaction costs, which have caused some to question the ability of this arbitrage...
- Research articles 2003-10-01
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