Arbitration

The combined operation of buying and selling values or goods based on the appreciation of the differences in their exchange rates, current or future. In the field of banking, arbitration consists of buying values on certain markets where the exchange rate is profitable, in order to resell them on other markets, thus taking advantage of the difference in exchange rates. In currency exchange selling a type of currency in order to buy another is also called arbitration. In the field of international finance arbitration consists in replacing a receivable which can be used in a certain currency and under certain conditions with another receivable which can be used in another currency and under other conditions.

Back to Financial dictionary