#ArbitrageTradingStrategy # Arbitrage Trading Strategy

## What is Arbitrage Trading?

Arbitrage is a trading strategy that exploits price discrepancies of the same asset across different markets or in different forms to generate risk-free profits. The basic principle involves simultaneously buying and selling an asset to profit from the price difference.

## Types of Arbitrage Strategies

### 1. Spatial Arbitrage

- Exploits price differences for the same asset on different exchanges

- Example: Buying Bitcoin on Exchange A at $30,000 while simultaneously selling it on Exchange B at $30,050

### 2. Triangular Arbitrage

- Involves three currencies in the forex market

- Example: USD → EUR → GBP → USD, where the final USD amount is greater than the initial

### 3. Statistical Arbitrage

- Uses quantitative models to identify temporary pricing inefficiencies

- Often involves pairs trading of correlated assets

### 4. Merger Arbitrage

- Capitalizes on price differences between current stock price and acquisition price during mergers

### 5. Convertible Arbitrage

- Involves buying convertible securities and shorting the underlying stock

## How Arbitrage Works

1. Identify price discrepancy for the same asset

2. Simultaneously execute buy and sell orders

3. Capture the price difference as profit

4. Repeat the process as opportunities arise