Currency arbitrage is when the value of a triangle of currency pairs does not cross-correlate, and a bank or large institution is able to exploit the temporary discrepancy for a profit before the market equalizes again.
Arbitrage is when an investor (usually an institutional investor) can pick up something in one market that has a higher value in another market, perhaps due to lower liquidity or information flow in the secondary market, and can move goods or securities across these markets and make a profit.
The cost of transferring the goods or securities from one market to the other must be lower than the spread between the two values. Currency arbitrage requires three currency pairs to be out of sync, called triangular arbitrage.
Let’s say the three currencies in question are dollars (USD), euros (EUR), and pounds (GBP). One day the dollar appreciates relative to the pound but there is no movement in the USD/EUR exchange rate yet. The arbitrageur could exploit the triangle and exchange USD for EUR, then EUR for GBP, then GBP for USD.
This would be a risk-free profit if the trader could execute all of the trades nearly instantaneously. These arbitrage opportunities will pretty much never present themselves to the average investor, since large banking institutions are monitoring the Forex markets closely at all times and could act on it more quickly, with large amounts of money, and this would cause the opportunity gap to close, as the exchange rates would be brought into equilibrium.
Calculating your net worth is a simple and worthwhile endeavor, and should be done once a year to measure your progress
An RIA is an asset manager that is registered with the SEC (in whatever state(s) they operate)
There are exceptions to this, in the form of no-appraisal mortgages which are available to lower-income homeowners
The Ease of Movement (EMV) indicator is a metric for the degree to which prices can be moved by a lower volume of trading
Unemployed people are still required to have health insurance. Under the Affordable Care Act (ACA), you will likely...
Some common examples of assets are cash, stocks, paid-for real estate, inventory, office equipment, jewelry, artwork, or other property of value
A market correction is typically a sharp, sudden decline in stock prices, where they fall in value by around 10% - 20%
The current yield on a bond takes into account its annual interest payment but also the price at which it can be sold
The financial markets are continuously evolving, with new platforms and trading mechanisms emerging to better serve investors and traders.
Credit Spread is an indication of the default risk perceived in corporate bonds at the current time. The credit...