ARBITRAGE

arbitrage  (ahr-b<<schwa>>-trahzh),  n.  The  simultaneous  buying  and  selling  of  identical

securities  in  different  markets,  with  the  hope  of  profiting  from  the  price  difference  in  those

markets.  —  Also  termed  space  arbitrage.  [Cases:  Securities  Regulation    53.17(4).  C.J.S.

Securities  Regulation  §  153.]  —  arbitrager  (ahr-b<<schwa>>-trazh-<<schwa>>r),  arbitrageur

(ahr-b<<schwa>>-trah-zh<<schwa>>r), n.

covered-interest arbitrage.The simultaneous investment in a currency and execution of spot-

and forward-rate foreign-exchange contracts to take advantage of exchange-rate and interest-rate

differentials between currencies without assuming foreign-exchange risk.

currency arbitrage.The simultaneous purchase of a currency in  one  market and sale of it in

another to take advantage of differences or fluctuations in exchange rates.

kind  arbitrage.Purchase  of  a  security  that,  having  no  restriction  other  than  the  payment  of

money,  is  exchangeable  or  convertible  within  a  reasonable  time  to  a  second  security,  with  a

simultaneous offsetting sale of the second security. — Also termed convertible arbitrage.

risk  arbitrage.Arbitrage  of  assets  that  are  probably,  but  not  necessarily,  equivalent;  esp.,

arbitrage of corporate stock in a potential merger or takeover, whereby the target company’s stock

is bought and the acquiring company’s stock is sold simultaneously.

time arbitrage.Purchase of a commodity against a present sale of the identical commodity for

a  future delivery; esp.,  the  simultaneous buying  and  selling  of  securities for  immediate  delivery

and future delivery, with the hope of profiting from the difference in prices. [Blacks Law 8th]