Financial Definition of Arbitrage

The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Perfectly efficient markets present no arbitrage opportunities. Perfectly efficient markets seldom exist.

The process of buying FOREIGN EXCHANGE, stocks, bonds and other commodities in one market and immediately selling them in another market at higher prices.

A technique employed to take advantage of differences in price. If, for example, ABC stock can be bought in New York for $10 a share and sold in London at $10.50, an arbitrageur may simultaneously purchase ABC stock here and sell the same amount in London, making a profit of $.50 a share, less expenses. Arbitrage may also involve the purchase of rights to subscribe to a security, or the purchase of a convertible security – and the sale at or about the same time of the security obtainable through exercise of the rights or of the security obtainable through conversion. (See: Convertible, Rights)

Browse or run a search for Arbitrage in the American Encyclopedia of Law, the Asian Encyclopedia of Law, the European Encyclopedia of Law, the UK Encyclopedia of Law or the Latin American and Spanish Encyclopedia of Law.

Arbitrage in Historical Law

You might be interested in the historical meaning of this term. Browse or search for Arbitrage in Historical Law in the Encyclopedia of Law.

Search for legal acronyms and/or abbreviations containing Arbitrage in the Legal Abbreviations and Acronyms Dictionary.

What does Arbitrage mean in American Law?

The definition of Arbitrage in the law of the United States, as defined by the lexicographer Arthur Leff in his legal dictionary is:

A process for profiting by taking advantage of there being a different price for something of value in one market than in another. If, for instance, Japanese yen are selling for 300 to the dollar in New York, but 299.5 to the dollar in London, it is profitable to buy them in London and sell them in New York. These geographic variations are, of course, very small and short lived in well-developed open markets e.g., for currency or securities, if only because of the arbitrage practitioners themselves: When people buy in London to sell in New York, demand increases in London while supply increases in New York, and the prices in both places will thus swiftly converge.

A process like arbitrage may take place in any goods, e.g., buying antique stoves in Maine where there are plenty and they go cheap, to sell in California, where there are few and they command good prices. But the term “arbitrage” is usually limited to transactions in particular goods, currency (especially), securities, and commodities traded on commodities markets.

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Vocabularies (Semantic Web Information)

Arbitrage in Law Enforcement

Main Entry: Law Enforcement in the Legal Dictionary. This section provides, in the context of Law Enforcement, a partial definition of arbitrage.

Grammar

This term is a noun.

Etimology of Arbitrage

(You may find arbitrage at the world legal encyclopedia and the etimology of more terms).

arbitration, exercise of the function of an arbitrator, late 15c., from Old French arbitrage “arbitration, judgment,” from arbitrer “to arbitrate, judge,” from Late Latin arbitrari, from Latin arbiter “judge, umpire, mediator” (see arbiter). In finance, “the business founded on a calculation of the temporary differences in the price of securities in different markets” (1875).

Resources

See Also

• Law Enforcement Officer
• Police Officer
• Law Enforcement Agency

Further Reading

• arbitrage in A Dictionary of Law Enforcement (Oxford University Press)
• arbitrage in the Encyclopedia of Law Enforcement
• A Treatise on the Police of the Metropolis

Concept of Arbitrage in the context of Real Property

A short definition of Arbitrage: The buying and selling of money or securities in different markets at a profit. For example: The value of 1 pound sterling is selling in New York for $2.00 and in London for $1.98. If one buys in London for dollars and sells in New York, there is a profit of $.02 per pound sterling. The term has come to be used with regard to the interest rate spread between wrap-around and underlying financing.

Concept of Arbitrage in the context of Real Property

A short definition of Arbitrage: The buying and selling of money or securities in different markets at a profit. For example: The value of 1 pound sterling is selling in New York for $2.00 and in London for $1.98. If one buys in London for dollars and sells in New York, there is a profit of $.02 per pound sterling. The term has come to be used with regard to the interest rate spread between wrap-around and underlying financing.