Arbitrage ( Economic Terms)

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. Often the assets being arbitraged  will  be  identical  in  a  more complicated  way ,for example, they will be different sorts of financial  securities that are each exposed to identical risks.Some kinds of arbitrage are completely risk-free – this is pure arbitrage. For instance, if  euros are available more cheaply in
dollars in London than in New York, arbitrageurs (also known as arbs) can make a risk-free  profit by buying euros in London and selling an identical amount of them in New York. Opportu-nities for pure arbitrage have become rare in recent years, partly because  of  the  globalisation of  financial  markets .Today, much of what is called arbitrage, much of it done by hedge funds , involves assets that have some similarities but are not identical. This is not pure arbitrage and can be far from risk free.