Börsenlexikon: Arbitrage

Arbitrage means the exploitation of price, interest rate and price differences between different stock exchanges by buying at places with low prices and simultaneously selling at places with high prices. Depending on the type of stock exchange values concerned, a distinction is made between foreign exchange arbitrage, precious metal (gold) arbitrage, interest rate arbitrage, securities arbitrage and commodities arbitrage. The arbitrageur has an advantage over the classic stock market speculator: he has no risk. This is because he only gives the order to the broker when there is a price difference between two stock exchanges that is profitable for him. He knows in advance how high his profit will be. In order to do this, he has to make do with very small profits and constantly watch the prices. However, the species of arbitrageurs is almost extinct today. In the age of modern means of communication, all information and data are available simultaneously in Tokyo, London, Frankfurt, New York and, thanks to the Internet, in every living room. Price differences are minimal and are settled in seconds. At the most, brokers can still exploit small differences of 0.1%, because apart from the stock exchange fee they pay no commissions. In this day and age, the independent speculator will not find a price difference between two stock exchanges that could cover even half of his expenses.