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Lesson_51_Arbitrage - Arbitrage Arbitrage is the process of...

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1 Lesson 51 1 Arbitrage Arbitrage is the process of making a riskless profit from finding price discrepancies in the market and exploiting them In this lesson, we explore two kinds of arbitrage as applied to the FX market Locational arbitrage and triangular arbitrage Lesson 51 2 The FX market is global, operating 24/7 When London banks open for business, NY is still asleep By the time banks in LA and Francisco come on line, London is shutting down By the time NY wakes up, it is midday in London Lesson 51 3 Information travels instantly over the web and by phone E.g., pounds are traded for dollars in London and NY at the same time The same currencies are being traded in geographically separated markets Locational arbitrage ensures that the exchange rate is the same in both locations
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