What is the Arbitrage Transaction and How To Do It?
Arbitrage is the process or practice of taking advantage of a price differential between two or more markets: arresting a combination of matching deals that take advantage upon the imbalance, the profit being the difference between the market prices. This is also a type of transaction or portfolio. In fact, the term is used in two different ways, so it has been passed on to either of two very different types of transactions or portfolios. An individual or institution who engages in such process is called as an arbitrageur. In academics, an arbitrage is a transaction that involves no negative cash flow at any reliance on probabilities or temporal state and a positive cash flow in at least one state; in simple terms, a risk-free profit. If a market price does not allow for profitable advantage of this practice or it does not offer such opportunities, the prices are considered to have no arbitrage or it is called arbitrage free. This condition is usually assumed for markets in economic an
