arbitrage

The simultaneous purchase and sale of two different, but closely related, securities to take advantage of a disparity in their prices. Alternatively, the purchase and sale of the same security in different markets.

Originally, most arbitrage occurred in the currency markets: arbitrageurs would buy in one market and sell in another. Nowadays, the practice applies equally to commodities, futures and stocks. For instance, if a company is dual-listed on two stock exchanges, and the prices are at variance, an arbitrageur has an opportunity to buy in one market and sell in another before the disparity is closed.