Arbitrage Meaning and Definition
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.”