#ArbitrageTradingStrategy
Overview
Arbitrage trading is a strategy that exploits price discrepancies of the same asset across different markets or in different forms to generate profit with minimal risk. True arbitrage is considered risk-free when executed properly, though most real-world arbitrage opportunities carry some degree of risk.
## Types of Arbitrage Strategies
### 1. Spatial Arbitrage (Geographical Arbitrage)
- Exploits price differences for the same asset in different locations
- Example: Buying a cryptocurrency on Exchange A where it's priced lower and simultaneously selling it on Exchange B where it's priced higher
### 2. Triangular Arbitrage
- Involves three currencies in the forex market
- Exploits inconsistencies between three different currency pairs
- Example: USD → EUR → GBP → USD (if the final USD amount is greater than the initial)
### 3. Statistical Arbitrage
- Uses mathematical models to identify price discrepancies
- Often involves pairs trading (long one asset and short a correlated asset)
### 4. Merger Arbitrage
- Capitalizes on price differences between current stock prices and acquisition prices during mergers
### 5. Convertible Arbitrage
- Involves buying convertible securities and hedging with short positions in the underlying stock