Arbitrage involves entering into financial transactions to obtain risk-free profits by leveraging differences in interest rates, exchange rates, or commodity prices between different markets.
An arbitrageur is a person or firm engaged in arbitrage, taking advantage of price differences of the same security in different markets. They attempt to profit from these discrepancies without exposing themselves to significant risk.
Carry trade is a financial strategy that involves borrowing funds in a low-interest-rate market and investing them in a higher return market. This practice capitalizes on the interest rate differential between two markets to generate profit.
Hot money refers to capital that moves rapidly between financial markets to capitalize on interest rate differences or to avoid risks such as political intervention. Additionally, it may refer to dishonestly acquired money that needs to remain untraceable.
Risk Arbitrage, also known as takeover arbitrage, is a strategy involving the simultaneous purchase of stock in a company being acquired and the sale of stock in its proposed acquirer.
A Riskless Transaction refers to a trade that guarantees a profit to the trader who initiates it, eliminating any potential for a financial loss. These transactions are generally achieved through methods like arbitrage.
