Arbitrage

Taking advantage of small price differences (of securities, currencies or goods) in different markets to make a profit, by purchasing in one market (where the price is less) and selling in another market (where the price is more). For example, if a company is listed in London and Tokyo, the price of its shares in London may be less than it is in Tokyo. By buying in London and selling in Tokyo, the arbitrageur makes a profit on the transaction. The term has been extended to so-called risk arbitrageurs who take a position in securities, particularly where a company may become or is the subject of a takeover bid.

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