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Futures Terms |
| Browse our glossary of terms by using the Alphabet below. You may also search the glossary by using the search box in the right column. | |
| Arbitrage | The simultaneous purchase and sale of equivalent assets in different markets to profit from an expected convergence between them. In theory, two equivalent assets should have almost identical present value of their future cash flows. An arbitrage opportunity exists when the net present value of two equivalent assets are not equal. Arbitrageurs will purchase the “cheap” asset, and sell or short the "expensive" asset. Profit is achieved when the market recognizes the imbalance, the prices come in line, and the arbitrageur unwinds the positions. |