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Everything about Arbitrage

Capitalisation of risk-free opportunities in financial markets

Arbitrage is the practice of taking advantage of a difference in prices in two or more markets – striking a combination of matching deals to capitalize on the difference, the profit being the difference between the market prices at which the unit is traded. Arbitrage has the effect of causing prices of the same or very similar assets in different markets to converge. Wikipedia →

🧭 Start here: a 6-step reading path

  1. Read the overview: ArbitrageA 5-minute orientation
  2. Skim a recent paper: Electricity Price Prediction for Energy Storage System Arbitrage: A Decision-Focused ApproachInfluential work since 2022
  3. Pick up a classic book: InvestmentsThe most-reprinted book on the subject
  4. Read the landmark paper: The arbitrage theory of capital asset pricingCited 4,490 times
  5. Go sideways: Rational pricingA closely related topic
  6. Go sideways: Fixed income arbitrageA closely related topic

đź“– Definitions

Noun A market activity in which a security, commodity, currency or other tradable item is bought in one market and sold simultaneously in another, in order to profit from price differences between the markets.

Noun Arbitration.

Verb To employ arbitrage

Verb To engage in arbitrage in, between, or among

🗂️ The subject at a glance

  1. Etymology
  2. Arbitrage equilibrium
  3. Arbitrage-free pricing approach for bonds
  4. Conditions for arbitrage
  5. Price convergence
  6. Risks
  7. Types

🏆 Landmark papers (most cited)

🆕 Influential since 2022

đź“š Books worth reading

Ranked by number of editions on Open Library, a rough measure of how lasting a book is.

đź”— Related topics