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; see 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

Private-credit investors are using an arbitrage strategy, shifting money from nontraded business-development companies to publicly traded ones.

From The Wall Street Journal • Apr. 24, 2026

Pentwater is best-known on Wall Street for its involvement in risk arbitrage which involves buying stocks that are the subject of merger deals.

From Barron's • Apr. 21, 2026

Savouri also cites problems like benefit arbitrage, for example, whereby the number of people claiming it falls whenever the government introduces stricter qualifying criteria.

From MarketWatch • Apr. 15, 2026

One ironic beneficiary of Starlink’s success is telecom mogul Charlie Ergen, who has used regulatory arbitrage to save his failed broadband bet.

From The Wall Street Journal • Mar. 30, 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