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The
simultaneous purchase and selling of a security in order to profit
from a differential in the price, usually on different exchanges or
marketplaces.
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Known
as a "riskless profit". An example of this is when an arbitrageur
buys a stock on a foreign exchange that hasn't adjusted for the constantly
changing exchange rate. So the arbitrageur will purchase the undervalued
stock and short sell the overvalued stock, thus profiting from the
difference. This is recommended for experienced investors only.
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Dictionary
