Define: Arbitrageur

someone who engages in arbitrage (who purchases securities in one market for immediate resale in another in the hope of profiting from the price differential).

An arbitrageur is an individual or an organisation that engages in the act of arbitrage, taking advantage of market imbalances. For example, an arbitrageur would locate a commodity (i.e. grain) or a security (i.e. stock) in a lower-priced market and then immediately resell in another market at a higher price, in the hope of profiting from the price differential. An arbitrageur might participate in risk-free arbitrage (true arbitrage) or an arbitrageur might be involved in risk arbitrage (statistical arbitrage). An arbitrageur would be engaged in risk-free arbitrage when buying stock at a low price and than selling high. The types of risk or statistical arbitrage that an arbitrageur might be involved in include merger, liquidation and/or pairs trading. Often, an arbitrageur is a seasoned investor who has a deep understanding of the markets and can exploit hard-to-find opportunities. From an economic standpoint, an arbitrageur can help reduce market price disparities and increase a market’s liquidity.

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This glossary post was last updated: 29th March 2024.