Arbitrage

The purchase and immediate resale of assets such as stocks, currencies or commodities or physical goods to profit from differences in exchange rates or prices on different markets. Traders may buy goods cheaply on one market and sell them on another for a higher price to exploit market inefficiencies. In the financial markets investors may buy an asset on one market and short sell it on another to make money from the spread between the two. However, technological advances mean that inefficient pricing is much rarer in the financial markets and the window of opportunity for acting upon is very small.

This definition is for general information purposes only