Arbitrage betting

In economics and finance, arbitrage [ahr-bi-trahzh] is the practice of taking advantage of a price difference between two or more markets. For example if you can buy one euro for one dollar, you immediately profit if the current exchange rate values euros above dollars. An arbitrage in simple terms, is the possibility of a risk-free profit at zero cost.

In principle and in academic use, an arbitrage is risk-free; in practice, there are always risks in arbitrage, some minor (such as fluctuation of prices decreasing profit margins), some major (such as devaluation of a currency or derivative). People who engage in arbitrage are called arbitrageurs — such as a bank or brokerage firm. The term is mainly applied to trading in financial instruments, such as bonds, stocks, derivatives, commodities and currencies.

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