What is arbitrage?

Business & Management
#1

Arbitrage refers to buying an asset in one market and simultaneously selling an identical asset in another market at a higher price.
Sometimes these will be identical assets in different markets, for instance, shares in a company listed on both the London Stock Exchange and New York Stock Exchange
Most of the Arbitrage consists of certain amount of risks which the investor has to go through, but the returns are also high with comparison to the risk involvement.

#2

Arbitrage is defined as a form of trade that profits by exploiting the price differences of identical or similar financial instruments in different markets or in different forms.

Example of Arbitrage

Consider the following arbitrage example:

Energy web token (EWT) trades on both Hotbit and Liquid exchange.

On a given day, let’s assume EWT trades for $5.60 on the Hotbit, and for $6.48 on the Liquid Exchanger, that would mean a price ditterence of $0.88.

Buying on Hotbit at $5.60 and selling off on Liquid Exchanger at $6.48 would yield a profit of $0.88 per EWT, which is about 15.7% profit.