Arbitrage Strategy

Topics: Long-Term Capital Management, Wal-Mart, Asda Pages: 2 (612 words) Published: March 19, 2013
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Arbitrage strategy Analysis
Arbitrage is one of survival formulas and techniques that many businesses have used in the past in order to take advantage in a broader aspect of the available market opportunities. Arbitrage is an important progression in carrying out of financial markets, and in their hypothetical representation (MacKenzie p 349). Arbitrage is a unique strategy as it focuses on utilizing variations by looking for economies of scale obtained via homogeny. Arbitrage is devoid of the assumption that depositors are balanced as it allows markets to be conceived as efficient. Arbitrage helps business investors to look overboard and visualize other markets and price disparities as opportunities rather than constraints. The originality of arbitrage, therefore, is the cross-border strategy as (Ghemawat) asserts. This essay analyzes original insights and own understanding of the concept of Arbitrage and concentrates on an example of arbitrage in the existing markets. In the history of business and enterprise, numerous traders took off in business by concentrating on products that had major variations in terms of prices and availability (Ghemawat). As MacKenzie (p 350) acknowledges, the eminent conceivable postulation that pricing incongruity will be purged by arbitrage gives space for the advancement of graceful and prominent economic systems of markets. He further elaborates that arbitrage necessitates efficiency for economic markets even in the existence of irrationality and other social or psychosomatic issues (MacKenzie p 350). However, even being viable, arbitrage has never been given the attention it is due because of certain reasons. To begin with, arbitrage strategies are not fascinating, and many investors do not take into account the sophistication necessary to implement it in the prevailing environment of globalization. This underestimation denies the advantage of harnessing all the benefits inherent...
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