In business, arbitrage is the non-speculative transfer of funds from one market to another to take advantage of differences in interest rates, exchange rates, or commodity prices between the two markets. It is non- speculative because an arbitrageur will only switch from one market to another if he knows exactly what the rates or prices are in both markets and he will only make the switch if the profit to be gained outweighs the costs of the operation. Thus, a large stock of a commodity in a user country may force its price below that in a producing country; if the difference is greater than the cost of shipping the goods back to the producing country, this could provide a profitable opportunity for arbitrage. Similar opportunities arise with bills of exchange and foreign currencies. Research Arbitrage
Abbreviations
Money
Research Arbitrage