arbitrage

Definition of arbitrage

Etymology

From French arbitrage < arbitrer ("to arbitrate"); see arbitrate.

Noun

arbitrage (countable and uncountable; plural arbitrages)

1. The practice of quickly buying and selling foreign currencies in different markets in order to make a profit
2. 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
3. Any market activity in which a commodity is bought and then sold quickly, for a profit which substantially exceeds the transaction cost
   
   * a. 1973, Benjamin Graham, The Intelligent Investor[1], 2003 HarperCollins ed., page 174:
   But in recent years, for reasons we shall develop later, the field of "arbitrages and workouts" became riskier and less profitable.

Derived terms

• arbitrageur

Related terms

• arbiter
• arbitrable
• arbitrary
• arbitrate
• arbitration

External links

• arbitrage in Webster's Revised Unabridged Dictionary, G. & C. Merriam, 1913
• arbitrage in The Century Dictionary, The Century Co., New York, 1911

Verb

to arbitrage (third-person singular simple present arbitrages, present participle arbitraging, simple past and past participle arbitraged)

1. (intransitive, finance) To employ arbitrage
   
   * 1961, Maurece Schiller, Fortunes in Special Situations in the Stock Market[2], page iv:
   He has arbitraged by purchasing in one market and simultaneously selling the same or similar merchandise in another market.
   
   
2. (transitive, finance) To engage in arbitrage in, between, or among
   
   * 2001, Frederic S. Mishkin, Prudential Supervision: What Works and what Doesn't, page 98:
   Indeed, as banks become more adept at internal risk classifications, their incentives to arbitrage economic and regulatory capital can only increase