Question
Download Solution PDFTaking profit from differences in prices or returns in different markets is called ____.
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is Arbitrage.
Key Points
- Taking profit from differences in prices or returns in different markets is called Arbitrage.
What is Market Arbitrage?
- Market arbitrage refers to the simultaneous buying and selling of the same security in different markets to take advantage of a price difference between the two separate markets.
- In the course of making a profit, arbitrage traders enhance the efficiency of the financial markets.
- As they buy and sell, the price differences between identical or similar assets narrow.
- The lower-priced assets are bid up while the higher-priced assets are sold off.
Additional Information
- Two-sided sales are platforms that bring buyers and sellers together to create and exchange value.
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