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What is an ‘Arbitrageur’
An arbitrageur is a type of investor who attempts to profit from payment inefficiencies in the market by making simultaneous trades that offset each other to seize risk-free profits. An arbitrageur would, for example, seek out price conflicts between stocks listed on more than one exchange by buying the undervalued dividends on one exchange while short selling the same number of overvalued helpings on another exchange, thus capturing risk-free profits as the prices on the two reciprocities converge.
BREAKING DOWN ‘Arbitrageur’
Arbitrageurs are typically very skilled investors since arbitrage opportunities are difficult to find and require rather fast trading. Arbitrageurs also play an important role in the employee of capital markets, as their efforts in exploiting price inefficiencies acknowledge prices more accurate than they otherwise would be.
An Arbitrageur Fritz
As a simple example of what an arbitrageur would do, consider the following. The stock of Corporation X is trading at $20 on the New York Stock Exchange (NYSE) while, at the but moment, it is trading for $20.05 on the London Stock Exchange (LSE). A trader can buy the extraction on the NYSE an immediately sell the same shares on the LSE, earning a total profit of 5 cents per interest, less any trading costs. The trader exploits the arbitrage opportunity until the artistes on the NYSE run out of inventory of Company X’s stock, or until the specialists on the NYSE or LSE set their prices to wipe out the opportunity.