The practice of exploiting price differences in different markets to generate profit.
Description
Arbitrage involves simultaneously buying and selling an asset or security in different markets to profit from price discrepancies. In wealth management, family offices may employ arbitrage strategies, such as merger arbitrage or convertible bond arbitrage, to capture low-risk gains. These opportunities often arise due to market inefficiencies, but they require sophisticated analysis, rapid execution, and significant capital to be profitable. While arbitrage is considered low-risk in theory, market volatility and transaction costs can erode profits, necessitating expertise.
