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People who search for and exploit arbitrage opportunities.
The simultaneous buying and selling of a security at two different prices in two different markets,
resulting in profits without risk. Perfectly efficient markets present noarbitrage opportunities. Perfectly
The purchase of securities on one market for immediate resale on
another market in order to profit from a price or currency discrepancy.
Transactions designed to make a sure profit from inconsistent prices.
An alternative model to the capital asset pricing model developed by
Stephen Ross and based purely onarbitragearguments.
A portfolio manager invests dollars in an instrument denominated in a foreign
currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for
Taking advantage of divergences in exchange rates in different money markets by
buying a currency in one market and selling it in another market.
Buyers and sellers seek each other directly and transact directly.
The options to identify additional, more valuable investmentopportunities
in the future that result from a current opportunity or operation.
An investment/trading strategy thatexploits divergences between actual and theoretical
A model valuing a firm in which net present value of new
investmentopportunitiesis explicitly examined.
Net present value of investments the firm is expected to make
Net present value of a firms future investments.
Unfinished researchand development that is acquired from another firm.
Government programs to promote researchand development.
Speculation on perceived mispriced securities, usually in connection with merger and
acquisition deals. Mike Donatelli, John Demasi, Frank Cohane, and Scott Lewis are all hardcore arbs. They
had a huge BT/MCI position in the summer of 1997, and came out smelling like roses.
A self-funding, self-hedged series of transactions that generally utilize mortgage
The simultaneous purchase and sale of the same asset to yield a profit.
Costs associated with locating a counterparty to a trade, including explicit costs (such as
advertising) and implicit costs (such as the value of time). Related:information costs.
A self-funding, self-hedged series of transactions that usually utilize
Striking offsetting deals among three markets simultaneously to obtain anarbitrageprofit.
Component that provides life coverage during the insureds life.
A contract with both insurance and investment components: (1) It pays off a stated
amount upon the death of the insured, and (2) it accumulates a cash value that the policyholder can redeem or
The purchasing of loans originated by others, with the servicing rights
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