Types of arbitrage
To explain and unearth the various types of arbitrage, it is important to not what arbitrage is in the first place. Arbitrage is considered the practice of taking advantage of a price difference between two or more markets. The price difference is basically considered as the profit. An arbitrage opportunity is present when one comes up with an opportunity to buy something for a low price, and sell it at a much higher price.
To further study this topic, we are going to lay focus on different types of arbitrage
Sports Arbitrage- Sports arbitrage also commonly known as Sure bets is a arbitrage where punter places a bet on all the outcome of a match and win a small percentage of the stake due to difference in odds by the bookmakers
Risk arbitrage – This is also popularly known as merger arbitrage. This basically includes the buying of stocks when a merger or acquisition is going to take place. This is a very good strategy used by hedge funds, who buy the stocks and sell it for a much higher price!
Retail arbitrage – Arbitrage can be performed with usual retail products from the supermarket. If one takes a look at Ebay then they will find so many products bought from china at a cheap price, and then sold online for a way higher price
Convertible arbitrage – This is a very popular strategy that basically involves one buying a convertible security and then short selling its underlying stock
Negative arbitrage – This is basically when one loses the opportunity to make a profit because the interst rate that a borrower pays on the debt is way higher than the interest rate at which the funds were invested
Statistical arbitrage – This is basically a strategy that includes complex statistical models to find trading opportunities among financial instruments with different market prices.
Conclusion
Thus, above have been laid down the various types of arbitrages and ways that an arbitrageur can make profits out of the price differences in the market. We hope the above article has been worthwhile and has been able to deliver ample information on the issue.















