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Arbitrage

Index Arbitrage

In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. [1]

121 relations: Airline booking ploys, Alan Greenspan, Algorithmic trading, American depositary receipt, Apple Inc., Arbitrage betting, Arbitrage pricing theory, Asset, Bankruptcy, Basel I, Bayesian probability, Berkshire Hathaway, Bermuda, Bond (finance), Buy and hold, Call option, Cash flow, Casino, Casino game, China, Coherence (philosophical gambling strategy), Commodity, Convergence trade, Convertible arbitrage, Convertible bond, Corporate bond, Covered interest arbitrage, Credit default swap, Credit rating agency, Credit risk, Currency, D. E. Shaw & Co., Delta neutral, Depositary receipt, Derivative (finance), Discounted cash flow, Discounting, Drop shipping, Dual-listed company, Economics, Efficient-market hypothesis, Exchange rate, Federal Reserve System, Finance, Financial crisis, Financial instrument, Fixed income, Fixed income arbitrage, Flight-to-quality, Fungibility, ..., General equilibrium theory, Global depository receipt, Halydean Corporation, High-frequency trading, Immunization (finance), Initial public offering, Insider trading, Insurance, Interest rate, Interest rate future, Interest rate parity, Interest rate swap, Intermediation, Investment banking, Ivan Boesky, John Maynard Keynes, Law of one price, Leverage (finance), Leveraged buyout, Limits to arbitrage, Long-Term Capital Management, Margin (finance), Market (economics), Market price, Mathematical finance, Mathieu de la Porte, Merchant, Michael Milken, Money creation, NASDAQ, New York Stock Exchange, No free lunch with vanishing risk, Pairs trade, Political arbitrage, Price discrimination, Price–earnings ratio, Purchasing power, Purchasing power parity, Put option, Rational pricing, Referee, Relative value (economics), Return on investment, Risk, Risk arbitrage, Risk neutral preferences, Risk-free interest rate, Royal Dutch Shell, Russia, Russian ruble, Securities Industry and Financial Markets Association, Securitization, Security (finance), Short (finance), Skewness, Speculation, Statistical arbitrage, Stock, Takeover, There ain't no such thing as a free lunch, Transaction cost, Triangular arbitrage, Uncovered interest arbitrage, United States Treasury security, Value investing, Vigorish, Volatility arbitrage, Xetra (trading system), Yield curve, Yield spread, 1997 Asian financial crisis. Expand index (71 more) »

Airline booking ploys

Airline booking ploys are tactics used by travelers in commercial aviation to lower the costs of flying to a desired destination.

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Alan Greenspan

Alan Greenspan (born March 6, 1926) is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006.

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Algorithmic trading

Algorithmic trading is a method of executing a large order (too large to fill all at once) using automated pre-programmed trading instructions accounting for variables such as time, price, and volume to send small slices of the order (child orders) out to the market over time.

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American depositary receipt

An American depositary receipt (ADR, and sometimes spelled depository) is a negotiable security that represents securities of a non-U.S. company that trades in the U.S. financial markets.

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Apple Inc.

Apple Inc. is an American multinational technology company headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, computer software, and online services.

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Arbitrage betting

Betting arbitrage, miraclebets, surebets, sports arbitraging is a particular case of arbitrage arising on betting markets due to either bookmakers' different opinions on event outcomes or plain errors.

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Arbitrage pricing theory

In finance, arbitrage pricing theory (APT) is a general theory of asset pricing that holds that the expected return of a financial asset can be modeled as a linear function of various factors or theoretical market indices, where sensitivity to changes in each factor is represented by a factor-specific beta coefficient.

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Asset

In financial accounting, an asset is an economic resource.

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Bankruptcy

Bankruptcy is a legal status of a person or other entity that cannot repay debts to creditors.

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Basel I

Basel I is the round of deliberations by central bankers from around the world, and in 1988, the Basel Committee on Banking Supervision (BCBS) in Basel, Switzerland, published a set of minimum capital requirements for banks.

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Bayesian probability

Bayesian probability is an interpretation of the concept of probability, in which, instead of frequency or propensity of some phenomenon, probability is interpreted as reasonable expectation representing a state of knowledge or as quantification of a personal belief.

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Berkshire Hathaway

Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States.

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Bermuda

Bermuda is a British Overseas Territory in the North Atlantic Ocean.

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Bond (finance)

In finance, a bond is an instrument of indebtedness of the bond issuer to the holders.

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Buy and hold

Buy and hold, also called position trading, is an investment strategy where an investor buys stocks and holds them for a long time, with the goal that stocks will gradually increase in value over a long period of time.

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Call option

A call option, often simply labeled a "call", is a financial contract between two parties, the buyer and the seller of this type of option.

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Cash flow

A cash flow describes a real or virtual movement of money.

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Casino

A casino is a facility which houses and accommodates certain types of gambling activities.

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Casino game

Games available in most casinos are commonly called casino games.

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China

China, officially the People's Republic of China (PRC), is a unitary one-party sovereign state in East Asia and the world's most populous country, with a population of around /1e9 round 3 billion.

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Coherence (philosophical gambling strategy)

In a thought experiment proposed by the Italian probabilist Bruno de Finetti in order to justify Bayesian probability, an array of wagers is coherent precisely if it does not expose the wagerer to certain loss regardless of the outcomes of events on which they are wagering, even if their opponent makes the most judicious choices.

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Commodity

In economics, a commodity is an economic good or service that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them.

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Convergence trade

Convergence trade is a trading strategy consisting of two positions: buying one asset forward—i.e., for delivery in future (going long the asset)—and selling a similar asset forward (going short the asset) for a higher price, in the expectation that by the time the assets must be delivered, the prices will have become closer to equal (will have converged), and thus one profits by the amount of convergence.

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Convertible arbitrage

Convertible arbitrage is a market-neutral investment strategy often employed by hedge funds.

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Convertible bond

In finance, a convertible bond or convertible note or convertible debt (or a convertible debenture if it has a maturity of greater than 10 years) is a type of bond that the holder can convert into a specified number of shares of common stock in the issuing company or cash of equal value.

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Corporate bond

A corporate bond is a bond issued by a corporation in order to raise financing for a variety of reasons such as to ongoing operations, M&A, or to expand business.

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Covered interest arbitrage

Covered interest arbitrage is an arbitrage trading strategy whereby an investor capitalizes on the interest rate differential between two countries by using a forward contract to cover (eliminate exposure to) exchange rate risk.

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Credit default swap

A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default (by the debtor) or other credit event.

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Credit rating agency

A credit rating agency (CRA, also called a ratings service) is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely interest payments and the likelihood of default.

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Credit risk

A credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments.

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Currency

A currency (from curraunt, "in circulation", from currens, -entis), in the most specific use of the word, refers to money in any form when in actual use or circulation as a medium of exchange, especially circulating banknotes and coins.

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D. E. Shaw & Co.

D.

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Delta neutral

In finance, delta neutral describes a portfolio of related financial securities, in which the portfolio value remains unchanged when small changes occur in the value of the underlying security.

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Depositary receipt

A depositary receipt (DR) is a negotiable financial instrument issued by a bank to represent a foreign company's publicly traded securities.

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Derivative (finance)

In finance, a derivative is a contract that derives its value from the performance of an underlying entity.

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Discounted cash flow

In finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money.

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Discounting

Discounting is a financial mechanism in which a debtor obtains the right to delay payments to a creditor, for a defined period of time, in exchange for a charge or fee.

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Drop shipping

Drop shipping is a supply chain management method in which the retailer does not keep goods in stock but instead transfers the customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.

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Dual-listed company

A dual-listed company or DLC is a corporate structure in which two corporations function as a single operating business through a legal equalization agreement, but retain separate legal identities and stock exchange listings.

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Economics

Economics is the social science that studies the production, distribution, and consumption of goods and services.

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Efficient-market hypothesis

The efficient-market hypothesis (EMH) is a theory in financial economics that states that asset prices fully reflect all available information.

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Exchange rate

In finance, an exchange rate is the rate at which one currency will be exchanged for another.

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Federal Reserve System

The Federal Reserve System (also known as the Federal Reserve or simply the Fed) is the central banking system of the United States of America.

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Finance

Finance is a field that is concerned with the allocation (investment) of assets and liabilities (known as elements of the balance statement) over space and time, often under conditions of risk or uncertainty.

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Financial crisis

A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value.

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Financial instrument

Financial instruments are monetary contracts between parties.

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Fixed income

Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule.

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Fixed income arbitrage

Fixed-income arbitrage is an investment strategy generally associated with hedge funds, which consists of the discovery and exploitation of inefficiencies in the pricing of bonds, i.e. instruments from either public or private issuers, yielding a contractually fixed stream of income.

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Flight-to-quality

A flight-to-quality, or flight-to-safety, is a financial market phenomenon occurring when investors sell what they perceive to be higher-risk investments and purchase safer investments, such as US Treasuries or gold.

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Fungibility

In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable.

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General equilibrium theory

In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an overall general equilibrium.

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Global depository receipt

A global depository receipt (GDR and sometimes spelled depository) is a general name for a depository receipt where a certificate issued by a depository bank, which purchases shares of foreign companies, creates a security on a local exchange backed by those shares.

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Halydean Corporation

Halydean Corporation is a vertically integrated dairy and beef industry consolidation holding company.

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High-frequency trading

In financial markets, high-frequency trading (HFT) is a type of algorithmic trading characterized by high speeds, high turnover rates, and high order-to-trade ratios that leverages high-frequency financial data and electronic trading tools.

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Immunization (finance)

In finance, interest rate immunization, as developed by Frank Redington is a strategy that ensures that a change in interest rates will not affect the value of a portfolio.

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Initial public offering

Initial public offering (IPO) or stock market launch is a type of public offering in which shares of a company are sold to institutional investors and usually also retail (individual) investors; an IPO is underwritten by one or more investment banks, who also arrange for the shares to be listed on one or more stock exchanges.

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Insider trading

Insider trading is the trading of a public company's stock or other securities (such as bonds or stock options) by individuals with access to nonpublic information about the company.

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Insurance

Insurance is a means of protection from financial loss.

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Interest rate

An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited or borrowed (called the principal sum).

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Interest rate future

An interest rate future is a financial derivative (a futures contract) with an interest-bearing instrument as the underlying asset.

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Interest rate parity

Interest rate parity is a no-arbitrage condition representing an equilibrium state under which investors will be indifferent to interest rates available on bank deposits in two countries.

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Interest rate swap

In finance, an interest rate swap (IRS) is an interest rate derivative (IRD).

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Intermediation

Intermediation involves the "matching" of lenders with savings to borrowers who need money by an agent or third party, such as a bank.

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Investment banking

An investment bank is typically a private company that provides various finance-related and other services to individuals, corporations, and governments such as raising financial capital by underwriting or acting as the client's agent in the issuance of securities.

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Ivan Boesky

Ivan Frederick Boesky (born March 6, 1937) is a former American stock trader who is notable for his prominent role in an insider trading scandal that occurred in the United States during the mid-1980s.

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John Maynard Keynes

John Maynard Keynes, 1st Baron Keynes (5 June 1883 – 21 April 1946), was a British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.

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Law of one price

"The law of one price (LOOP) states that in the absence of trade frictions (such as transport costs and tariffs), and under conditions of free competition and price flexibility (where no individual sellers or buyers have power to manipulate prices and prices can freely adjust), identical goods sold in different locations must sell for the same price when prices are expressed in a common currency.

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Leverage (finance)

In finance, leverage (sometimes referred to as gearing in the United Kingdom and Australia) is any technique involving the use of borrowed funds in the purchase of an asset, with the expectation that the after tax income from the asset and asset price appreciation will exceed the borrowing cost.

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Leveraged buyout

A leveraged buyout (LBO) is a financial transaction in which a company is purchased with a combination of equity and debt, such that the company's cash flow is the collateral used to secure and repay the borrowed money.

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Limits to arbitrage

Limits to arbitrage is a theory that, due to restrictions that are placed on funds that would ordinarily be used by rational traders to arbitrage away pricing inefficiencies, prices may remain in a non-equilibrium state for protracted periods of time.

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Long-Term Capital Management

Long-Term Capital Management L.P. (LTCM) was a hedge fund management firmA financial History of the United States Volume II: 1970–2001, Jerry W. Markham, Chapter 5: "Bank Consolidation", M. E. Sharpe, Inc., 2002 based in Greenwich, Connecticut that used absolute-return trading strategies combined with high financial leverage.

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Margin (finance)

In finance, margin is collateral that the holder of a financial instrument has to deposit with a counterparty (most often their broker or an exchange) to cover some or all of the credit risk the holder poses for the counterparty.

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Market (economics)

A market is one of the many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange.

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Market price

In economics, market price is the economic price for which a good or service is offered in the marketplace.

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Mathematical finance

Mathematical finance, also known as quantitative finance, is a field of applied mathematics, concerned with mathematical modeling of financial markets.

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Mathieu de la Porte

Mathieu de la Porte (Nijmegen, 17th century - 1722) was a French mathematician.

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Merchant

A merchant is a person who trades in commodities produced by other people.

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Michael Milken

Michael Robert Milken (born July 4, 1946) is an American former financier and philanthropist.

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Money creation

Money creation is the process by which the money supply of a country, or of an economic or monetary region,Such as the Eurozone or ECCAS is increased.

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NASDAQ

The Nasdaq Stock Market is an American stock exchange.

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New York Stock Exchange

The New York Stock Exchange (abbreviated as NYSE, and nicknamed "The Big Board"), is an American stock exchange located at 11 Wall Street, Lower Manhattan, New York City, New York.

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No free lunch with vanishing risk

No free lunch with vanishing risk (NFLVR) is a no-arbitrage argument.

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Pairs trade

The pairs trade or pair trading is a market neutral trading strategy enabling traders to profit from virtually any market conditions: uptrend, downtrend, or sideways movement.

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Political arbitrage

Political arbitrage is a trading strategy which involves using knowledge or estimates of future political activity to forecast and discount security values.

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Price discrimination

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets.

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Price–earnings ratio

The price/earnings ratio (often shortened to the P/E ratio or the PER) is the ratio of a company's stock price to the company's earnings per share.

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Purchasing power

Purchasing power (sometimes retroactively called adjusted for inflation) is the number and quality or value of goods and services that can be purchased with a unit of currency.

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Purchasing power parity

Purchasing power parity (PPP) is a neoclassical economic theory that states that the exchange rate between two countries is equal to the ratio of the currencies' respective purchasing power.

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Put option

In finance, a put or put option is a stock market device which gives the owner of a put the right, but not the obligation, to sell an asset (the underlying), at a specified price (the strike), by a predetermined date (the expiry or maturity) to a given party (the seller of the put).

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Rational pricing

Rational pricing is the assumption in financial economics that asset prices (and hence asset pricing models) will reflect the arbitrage-free price of the asset as any deviation from this price will be "arbitraged away".

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Referee

A referee or simply ref is the person of authority in a variety of sports who is responsible for presiding over the game from a neutral point of view and making on-the-fly decisions that enforce the rules of the sport, including sportsmanship decisions such as ejection.

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Relative value (economics)

In finance, relative value is the attractiveness measured in terms of risk, liquidity, and return of one financial instrument relative to another, or for a given instrument, of one maturity relative to another.

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Return on investment

Return on investment (ROI) is the ratio between the net profit and cost of investment resulting from an investment of some resource.

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Risk

Risk is the potential of gaining or losing something of value.

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Risk arbitrage

Risk arbitrage, also known as merger arbitrage, is a hedge fund investment strategy that speculates on the successful completion of mergers and acquisitions.

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Risk neutral preferences

In economics and finance, risk neutral preferences are preferences that are neither risk averse nor risk seeking.

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Risk-free interest rate

The risk-free interest rate is the rate of return of a hypothetical investment with no risk of financial loss, over a given period of time.

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Royal Dutch Shell

Royal Dutch Shell plc, commonly known as Shell, is a British–Dutch multinational oil and gas company headquartered in the Netherlands and incorporated in the United Kingdom.

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Russia

Russia (rɐˈsʲijə), officially the Russian Federation (p), is a country in Eurasia. At, Russia is the largest country in the world by area, covering more than one-eighth of the Earth's inhabited land area, and the ninth most populous, with over 144 million people as of December 2017, excluding Crimea. About 77% of the population live in the western, European part of the country. Russia's capital Moscow is one of the largest cities in the world; other major cities include Saint Petersburg, Novosibirsk, Yekaterinburg and Nizhny Novgorod. Extending across the entirety of Northern Asia and much of Eastern Europe, Russia spans eleven time zones and incorporates a wide range of environments and landforms. From northwest to southeast, Russia shares land borders with Norway, Finland, Estonia, Latvia, Lithuania and Poland (both with Kaliningrad Oblast), Belarus, Ukraine, Georgia, Azerbaijan, Kazakhstan, China, Mongolia and North Korea. It shares maritime borders with Japan by the Sea of Okhotsk and the U.S. state of Alaska across the Bering Strait. The East Slavs emerged as a recognizable group in Europe between the 3rd and 8th centuries AD. Founded and ruled by a Varangian warrior elite and their descendants, the medieval state of Rus arose in the 9th century. In 988 it adopted Orthodox Christianity from the Byzantine Empire, beginning the synthesis of Byzantine and Slavic cultures that defined Russian culture for the next millennium. Rus' ultimately disintegrated into a number of smaller states; most of the Rus' lands were overrun by the Mongol invasion and became tributaries of the nomadic Golden Horde in the 13th century. The Grand Duchy of Moscow gradually reunified the surrounding Russian principalities, achieved independence from the Golden Horde. By the 18th century, the nation had greatly expanded through conquest, annexation, and exploration to become the Russian Empire, which was the third largest empire in history, stretching from Poland on the west to Alaska on the east. Following the Russian Revolution, the Russian Soviet Federative Socialist Republic became the largest and leading constituent of the Union of Soviet Socialist Republics, the world's first constitutionally socialist state. The Soviet Union played a decisive role in the Allied victory in World War II, and emerged as a recognized superpower and rival to the United States during the Cold War. The Soviet era saw some of the most significant technological achievements of the 20th century, including the world's first human-made satellite and the launching of the first humans in space. By the end of 1990, the Soviet Union had the world's second largest economy, largest standing military in the world and the largest stockpile of weapons of mass destruction. Following the dissolution of the Soviet Union in 1991, twelve independent republics emerged from the USSR: Russia, Ukraine, Belarus, Kazakhstan, Uzbekistan, Armenia, Azerbaijan, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan and the Baltic states regained independence: Estonia, Latvia, Lithuania; the Russian SFSR reconstituted itself as the Russian Federation and is recognized as the continuing legal personality and a successor of the Soviet Union. It is governed as a federal semi-presidential republic. The Russian economy ranks as the twelfth largest by nominal GDP and sixth largest by purchasing power parity in 2015. Russia's extensive mineral and energy resources are the largest such reserves in the world, making it one of the leading producers of oil and natural gas globally. The country is one of the five recognized nuclear weapons states and possesses the largest stockpile of weapons of mass destruction. Russia is a great power as well as a regional power and has been characterised as a potential superpower. It is a permanent member of the United Nations Security Council and an active global partner of ASEAN, as well as a member of the G20, the Shanghai Cooperation Organisation (SCO), the Council of Europe, the Asia-Pacific Economic Cooperation (APEC), the Organization for Security and Co-operation in Europe (OSCE), and the World Trade Organization (WTO), as well as being the leading member of the Commonwealth of Independent States (CIS), the Collective Security Treaty Organization (CSTO) and one of the five members of the Eurasian Economic Union (EEU), along with Armenia, Belarus, Kazakhstan and Kyrgyzstan.

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Russian ruble

The Russian ruble or rouble (рубль rublʹ, plural: рубли́ rubli; sign: ₽, руб; code: RUB) is the currency of the Russian Federation, the two partially recognized republics of Abkhazia and South Ossetia and the two unrecognized republics of Donetsk and Luhansk.

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Securities Industry and Financial Markets Association

The Securities Industry and Financial Markets Association (SIFMA) is a United States industry trade group representing securities firms, banks, and asset management companies.

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Securitization

Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt obligations (CDOs).

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Security (finance)

A security is a tradable financial asset.

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Short (finance)

In finance, a short sale (also known as a short, shorting, or going short) is the sale of an asset (securities or other financial instrument) that the seller does not own.

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Skewness

In probability theory and statistics, skewness is a measure of the asymmetry of the probability distribution of a real-valued random variable about its mean.

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Speculation

Speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable at a future date.

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Statistical arbitrage

In finance, statistical arbitrage (often abbreviated as Stat Arb or StatArb) is a class of short-term financial trading strategies that employ mean reversion models involving broadly diversified portfolios of securities (hundreds to thousands) held for short periods of time (generally seconds to days).

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Stock

The stock (also capital stock) of a corporation is constituted of the equity stock of its owners.

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Takeover

In business, a takeover is the purchase of one company (the target) by another (the acquirer, or bidder).

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There ain't no such thing as a free lunch

"There ain't no such thing as a free lunch" (alternatively, "There is no such thing as a free lunch" or other variants) is a popular adage communicating the idea that it is impossible to get something for nothing.

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Transaction cost

In economics and related disciplines, a transaction cost is a cost in making any economic trade when participating in a market.

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Triangular arbitrage

Triangular arbitrage (also referred to as cross currency arbitrage or three-point arbitrage) is the act of exploiting an arbitrage opportunity resulting from a pricing discrepancy among three different currencies in the foreign exchange market.

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Uncovered interest arbitrage

Uncovered interest arbitrage is an arbitrage trading strategy whereby an investor capitalizes on the interest rate differential between two countries.

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United States Treasury security

A United States Treasury security is an IOU from the US Government.

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Value investing

Value investing is an investment paradigm which generally involves buying securities that appear underpriced by some form of fundamental analysis, though it has taken many forms since its inception.

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Vigorish

Vigorish, or simply the vig, also known as juice, under-juice, the cut or the take, is the amount charged by a bookmaker, or bookie, for taking a bet from a gambler.

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Volatility arbitrage

In finance, volatility arbitrage (or vol arb) is a type of statistical arbitrage that is implemented by trading a delta neutral portfolio of an option and its underlying.

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Xetra (trading system)

Xetra (Market Identifier Code (MIC): XETR) is a trading venue operated by Frankfurter Wertpapierbörse (FWB, the Frankfurt Stock Exchange) based in Frankfurt, Germany.

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Yield curve

In finance, the yield curve is a curve showing several yields or interest rates across different contract lengths (2 month, 2 year, 20 year, etc....) for a similar debt contract.

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Yield spread

In finance, the yield spread or credit spread is the difference between the quoted rates of return on two different investments, usually of different credit qualities but similar maturities.

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1997 Asian financial crisis

The Asian financial crisis was a period of financial crisis that gripped much of East Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion.

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Arbitrage trader, Arbitrage-free, Arbitrageur, Convergence trades, Execution risk, P.F.D Trading, Price differential, Regulatory arbitrage.

References

[1] https://en.wikipedia.org/wiki/Arbitrage

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