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Discount Arbitrage |
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Discount ArbitrageA riskless arbitrage in which a discount option is purchased and an opposite position is taken in the underlying security. The arbitrageur may either buy a call at a discount and simultaneously sell the underlying security (basic call arbitrage) or maybuy a put at a discount and simultaneously buy the underlying security (basic put arbitrage). See also Discount.Discount Arbitrage Similar MatchesCurrency arbitrageCurrency arbitrageTaking advantage of divergences in exchange rates in different money markets by buying a currency in one market and selling it in another market. ArbitrageArbitrageA combination of transactions designed to profit from an existing discrepancy among prices, exchange rates, and/or interest rates on different markets without risk of these changing. Simplest is simultaneous purchase and sale of the same thing in different markets, but more complex forms include triangular arbitrage and covered interest arbitrage. Multiple ArbitrageMultiple ArbitrageIn the context of hedge funds, a style of management where by the fund employs more than one arbitrage strategy. Portfolio manager opportunistically allocates capital among the various strategies in order to create the best risk/reward profile for the overall fund. Common strategies include merger arbitrage, convertible arbitrage, fixed income arbitrage, long/short equities pairs trading, and volatility arbitrage. In the context of equity and private equity investment, this refers to an investment in a firm where by standard multiples (earnings/price, book/price) indicate the price is far cheaper than industry averages. Triangular arbitrageTriangular arbitrageArbitrage among three currencies. For example (letting x/y be the currency x per unit of currency y exchange rate), if $/¥ > ($/£)(£/¥), then an arbitrager can make a profit buying £ with $; buying ¥ with those £; and then selling those ¥ for $. Convertible ArbitrageConvertible ArbitrageIn the context of hedge funds, a style of management that involves the simultaneous purchase of a convertible bond and the short sale of shares of the underlying stock. Interest rate risk may or may not be hedged. Further SuggestionsArbitrage free option pricing modelsRiskless arbitrage arbitrageur Reversal Arbitrage Tax arbitrage Index arbitrage Special arbitrage account Arbitrageur Triangular arbitrage Structured arbitrage transaction Arbitrage bonds conversion arbitrage Covered interest arbitrage Arbitrage Trading Program (ATP) International arbitrage Risk controlled arbitrage Merger Arbitrage Covered interest arbitrage arbitrage Locational arbitrage One-way arbitrage |
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