Arbitrage Meaning and Definition

Arbitrage

Arbitrage

Pronunciation

/ˈɑrbɪtrɪʒ/

Part of Speech

Noun

Definition

The simultaneous purchase and sale of a financial instrument or commodity in two or more different markets or locations to take advantage of a price difference.

Examples

  • The investor engaged in arbitrage to buy a security in one market and sell it in another where the price was higher.
  • Arbitrage is a common strategy used by hedge funds to generate profits.

Synonyms

  • Speculation
  • Play

Antonyms

  • Hedging
  • Long-term investment

Etymology

The word “arbitrage” comes from the Latin “arbitrarius,” meaning arbitrator or moderator, and the French “arbitrage,” meaning arbitration. It was first used in English in the 18th century to describe the practice of intervening in disputes.

Usage Notes

Arbitrage is often used in financial contexts, but can also be applied to other areas, such as art or collectibles, where price disparities exist.

Cultural References

The term “arbitrage” has been featured in various films, including “Trading Places” (1983) and “The Wolf of Wall Street” (2013).

Idiomatic Expressions or Phrases

Arbitrage often goes hand-in-hand with the phrase “price difference,” and is sometimes referred to as “price arbitrage.”

Related Words or Phrases

Arbitrage is closely related to concepts like hedging, speculation, and trading.

Collocations

Arbitrage is often paired with words like “opportunity,” “risk,” and “reward.”

Frequency of Use

Arbitrage is a commonly used term in financial and economic circles, but may not be as widely recognized in everyday conversation.

Common Misspellings

The most common misspellings of “arbitrage” include “arbitraj” and “arbitragge.”

Related Words