arbitrage

American  

[ahr-bi-trahzh, ahr-bi-trij] / ˈɑr bɪˌtrɑʒ, ˈɑr bɪ trɪdʒ /

noun

1. Finance. the simultaneous purchase and sale of the same securities, commodities, or foreign exchange in different markets to profit from unequal prices.

2. Archaic. arbitration.

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verb (used without object)

arbitraged, arbitraging

1. Finance. to engage in arbitrage.

arbitrage British  

/ ˈɑːbɪˌtrɑːʒ, ˈɑːbɪtrɪdʒ, ˌɑːbɪtræˈʒɜː /

noun

1. finance

   1. the purchase of currencies, securities, or commodities in one market for immediate resale in others in order to profit from unequal prices

   2. ( as modifier )

      arbitrage operations

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Other Word Forms

• arbitrageur noun

Etymology

Origin of arbitrage

1470–80; < Middle French, equivalent to arbitr ( er ) to arbitrate, regulate (< Latin arbitrārī; arbitrate ) + -age -age

Explanation

"Buy low, sell high" is the mantra of the stock market. Perhaps the most extreme example of this is arbitrage, the act of buying and selling goods simultaneously in different markets to gain an immediate profit. Impressive, but tricky. Although the meaning of the word arbitrage as used today is relatively new, dating back to the late 19th Century, the word itself can be traced back to the Latin arbitrārī, with the meaning "to regulate." In English, arbitrage first meant "using personal judgment." If you practice arbitrage, you'll need to use great personal judgment in dealing with varying stock prices. Remember to pronounce the last syllable "trahzh," as if it were French.

Example Sentences

The widening spread between WTI and Brent may be temporary, reflecting stress in financial markets and inability of financial intermediaries and commodities trading firms to arbitrage it away.

From MarketWatch • Mar. 26, 2026

The sector’s fall from popularity has opened up an opportunity for arbitrage.

From Barron's • Mar. 24, 2026

Otherwise, the system creates incentives for regulatory arbitrage, in which firms migrate toward structures that minimize governmental oversight of risks.

From MarketWatch • Mar. 20, 2026

Merger arbitrage traders boost that with borrowed money, so why are they wary?

From The Wall Street Journal • Mar. 20, 2026

He suspected, not unreasonably, that he might be the only person in Berkeley looking for arbitrage opportunities in the market for credit derivatives.

From "The Big Short" by Michael Lewis