Banking Term: Arbitrage
Find important banking term that is useful in upcoming banking exam.
It is exploitation of difference between the price of financial assets or Currency or a commodity within or between markets by buying where prices are low and selling where prices are higher. Unlike Speculation, arbitrage does not normally involve significant risks, since the buying and selling operations are carried more or less simultaneously and the profit made does not depend upon taking a view on future price changes.
In other words, the opportunity to buy an asset at a low price then immediately selling it on a different market for a higher price.