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could profit by selling short the stocks in New York and buying the futures contract.

, Anatomy of a Stock-Market Crash, 18 Sep. 2017

, who then implicated Martin Siegel (HBS 71), formerly of Kidder Peabody but then working for Drexel Burnham Lambert.

, Harvard Business School and the Propagation of Immoral Profit Strategies, 6 Apr. 2017

Stewarts book brought the reader inside the room of the most private meetings and discussions among the likes of the famed

Ivan Boesky and the financier Michael Milken, as well as those prosecuting them, led by Rudy Giuliani.

, An Insider-Trading Tale That Reads Like a Thriller, 7 Feb. 2017

These example sentences are selected automatically from various online news sources to reflect current usage of the word arbitrageur. Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors.Send us feedback.

Note:Despite appearances,arbitrageuris not borrowed from French, which uses the derivativearbitragiste.

Anarbitrageuris a person who exploits the differences in the price of a given security by simultaneously purchasing and selling that security.

For example, if Company XYZsstocktrades at $5 per share on the New York Stock Exchange and the equivalent of $5.05 on the London Stock Exchange, an arbitrageur would purchase the stock for $5 on theNYSEand sell it on the LSE for $5.05, pocketing $0.05 per share. Theoretically, the prices on both exchanges should be the same at all times, but arbitrage opportunities arise when theyre not.

Arbitrageurs also try to exploit price differences created by mergers. In some cases, they purchase the shares of companies that are the targets of purchase offers, hoping to pocket the difference between the trading price and the eventual cash payment resulting from themerger. In theory,arbitrageis a riskless activity, but merger arbitrage is not riskless – -there is a chance the merger will not happen, and the price of the targets shares would probably fall in that event.

Institutions are usually the biggest arbitrageurs — the large volumes of shares they trade can make millions in profits even if the spread is small (and it usually is just pennies). Thetransaction coststhat would normally eliminate any profit individual investors could hope for are often relatively minimal for institutions.

The main creator of arbitrage opportunity used to be a lack of real-time communication about prices in other markets, but technology has reduced the number of arbitrage opportunities. The relatively few arbitrage opportunities that do exist are elusive and dont last for long — when people realize that a security is cheaper on one exchange than another, their interest in exploiting the opportunity will drive up the price of the cheap security and drive down the price of the expensive security until there is no longer a price difference. In a sense, arbitrageurs ensure equilibrium in the markets.

Rhyming Dictionary:Words that rhyme witharbitrageur

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