Arbitrageur

In finance, the term “arbitrageur” denotes a person or entity which uses arbitrage to profit from differences in prices charged for the same product in two different markets at little or no risk.

Example 1: Suppose the CHF/USD currency pair traded at CHF 0.97 to USD 1 on one exchange and at CHF 0.98 to USD 1 on another exchange. A forex trader with access to both exchanges could purchase dollars at the lower price (0.97 centimes) and simultaneously sell them on the second exchange at the higher price (0.98 centimes per dollar), clearing 1 centime per dollar sold at zero risk.

Example 2: An arbitrageur takes out a loan in a country where interest rates are very low, and lends the money out in a country where interest rates are high. The difference between the low interest which they pays for capital and the high interest which they earn makes up their profit.

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