Arbitrage Hedge Strategy

Arbitrage Hedge Strategy

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Arbitrage Hedge Strategy

Arbitrage Hedge Strategy definition:  Arbitrage is a hedging practice which benefits from pricing inefficiencies. The same or similar security is bought and sold at the same time on different markets.  A positive spread between the two prices is essentially riskless profit to the investor. An example of arbitrage is buying a security long and selling short a futures contract for the same security. Because markets are highly efficient, it is extremely difficult to identify arbitrage opportunities, but some exist for short periods of time and can be detected by technological aids.

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