Definition of Arbitrage

Arbitrage occurs when a person exploits the market from the difference that happens when an asset is purchased in one market and sold in a different market. The markets are usually different from where the asset is purchased then the markets where the asset is sold. The inefficiency of markets gives way to arbitrage.


Example of Arbitrage:

A person buys stock from Market ABC at the price of $50 and sells it to market XYZ for the price of $51, where he earned $1 profit in the result difference of the markets from where the stock was bought and sold.

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