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BNET Business Dictionary
- Arbitrage
- the buying and selling of foreign currencies, products, or financial securities between two or more markets in order to make an immediate profit by exploiting...
- Arbitrage definition on BNET »
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- Pitfalls and Opportunities for the Conduct of Monetary Policy
- Financial market developments over the last decade have greatly increased interest in the properties of high-frequency data. Stimulated by the search for greater arbitrage opportunities, which have been created or facilitated by innovations in computer technology, central banks are now able to monitor and, if they choose, react daily to...
- White papers
- The Forgotten Strategy
- The Idea in Brief Multinationals’ global operations consistently underperform their domestic operations. Why? These companies’ strategies focus mostly on similarities across their markets: whenever possible, global companies standardize their business models to achieve economies of scale. They...
- Articles 2007-11-02
- Pricing-to-Market: Price Discrimination or Product Differentiation?
- This paper examines the extent to which a false detection of Pricing-To-Market pseudo PTM arises from the use of unit value data. To do so, the authors analyze two scenarios. Both scenarios involve a monopolist located in the home country producing a low- and high-quality variety of a good. In...
- White papers 2005-11-02
- Transforming Your Back Office: Securing a Competitive Advantage With Offshore Business Process Outsourcing
- The primary reason financial institutions consider offshoring business processes today is labor arbitrage - getting the job done cheaper by qualified, but less expensive workers in other countries. Significant as it is, however, expense reduction is an embryonic opportunity related to offshore outsourcing. Waiting in the wings are more far-reaching...
- White papers 2005-08-16
- Capital Gains Taxes, Pricing Spreads and Arbitrage: Evidence From U.S. Cross-Listed Firms
- This paper examines how personal taxes affect the pricing of stocks that are simultaneously listed and traded on multiple exchanges around the globe. Specifically, the paper studies how an unexpected reduction in U.S. capital gains taxes at the announcement of the 1997 budget accord changes the pricing of foreign firms'...
- White papers 2005-06-30
- Parallel Trade, International Exhaustion And Intellectual Property Rights: A Welfare Analysis
- This paper analyses the issue of parallel trade arbitrage for products protected by intellectual property rights. Many countries have traditionally allowed owners of intellectual property rights to prohibit arbitrage in the face of international price discrimination. In a well-known paper Malueg and Schwartz (1994) showed that this policy decreases social...
- White papers 2005-04-05
- Put-Call Parity and Arbitrage Opportunity
- An important principle in options pricing is called put-call parity. It says that the value of a call option at one strike price implies a certain fair value for the corresponding put, and vice versa. The argument for this pricing relationship relies on the arbitrage opportunity that results if there...
- White papers 2005-01-19
- Consumption Risk and the Cost of Equity Capital
- The paper reveals that in an ideal world with perfect capital markets where there are no arbitrage opportunities; investors would require a higher return on an asset only if it has a larger exposure to systematic economy wide pervasive risk. The paper uses yearly returns on stocks to take into...
- White papers 2005-01-01
- Arbitrage-Free Price Ranges for nth-to-Default Swaps
- The arbitrage-free range of values of the loss leg of an nth-to-default swap, and the arbitrage-free range of premium payments for such a swap, are derived for homogeneous baskets of arbitrary numbers of reference entities. Elementary arbitrage arguments are given which show that arbitrage opportunities exist if the prices lie...
- White papers 2004-11-29
- Trading the Odds With Arbitrage
- Arbitrage, in its purest form, is defined as the purchase of securities on one market for immediate resale on another market in order to profit from a price discrepancy. This results in immediate risk-free profit. Arbitrage is a very broad form of trading that encompasses many strategies; however, they all...
- White papers 2004-11-10
- Risks in Hedge Fund Strategies: Case of Convertible Arbitrage
- Using data on Japanese and US convertible bonds and underlying stocks, it analyzes the risk return characteristics of convertible arbitrage funds. The hypothesize that there are three primitive trading strategies that explain convertible arbitrage funds, returns, positive carry, volatility arbitrage, and credit arbitrage. They are referred as asset-based style factors....
- White papers 2004-09-16
- Maximize Your Outsourcing Benefits Through Complexity Arbitrage
- Outsourcing has become not only one of the most widely discussed business phenomena, but also one of the most poorly understood. Although it is the most rapidly growing business sector in India and is fast becoming India's fastest growing export industry, there has been little coherent explanation in the academic...
- White papers 2004-07-18
- Asset Securitization: New Regulatory Responses to Capital Arbitrage
- Asset Securitization facilitates 'on-balance sheet' lending to an 'off-balance sheet' income stream that improves return on capital and places fewer constraints on regulatory capital. The paper depicts that since the primary goal of asset securitization is to separate the credit risk of the originator from that of the underlying assets,...
- White papers 2004-04-24
- Arbitrage Free Risk Loads for Brokers
- When actuaries write about insurance pricing formula, they first identify the formula in question and then discuss the pros and cons of it. This is in stark contrast to the capital market pricing papers. This paper follows the capital market paradigm, deriving the necessary and sufficient risk load formula from...
- White papers 2004-02-18
- Limits of Arbitrage: Theory and Evidence From the Mortgage-Backed Securities Market
- "Limits of Arbitrage" theories require that the marginal investor in a particular asset market be a specialized arbitrageur. The paper examines the mortgage-backed securities market in this light, as casual empiricism suggests that investors in the MBS market do seem to be very specialized. It shows that risks that seem...
- White papers 2004-01-22
- Why Are Most Funds Open-End? Competition and the Limits of Arbitrage
- The majority of asset-management intermediaries (e.g., mutual funds, hedge funds) are structured on an open-end basis, even though it appears that the open-end form can be a serious impediment to arbitrage. This paper argues that the equilibrium degree of open ending in an economy can be excessive from the point...
- White papers 2004-01-01
- Outsourcing, Protectionism, and the Global Labor Arbitrage
- This study by Morgan Stanley examines the pressures of currency realignment been aggravated by the IT-enabled global labor arbitrage, as production and employment shift from high-cost to low-cost destinations, leading to trade frictions. The paper reveals certain interesting fact such as E-based connectivity is the new mega-trend behind the global...
- White papers 2003-11-11
- Liquidity Risk and Arbitrage Pricing Theory
- Classical theories of financial markets assume an infinitely liquid market and that all traders act as price takers. This theory is a good approximation for highly liquid stocks, although even there it does not apply well for large traders or for modeling transaction costs. This paper extends the classical approach...
- White papers 2003-11-04
- Multi-Market Trading and Arbitrage
- This study investigates the differences in the prices of shares of stocks that trade simultaneously in different markets around the world. Specifically, it compares the daily prices of American Depositary Receipts ADRs and other types of cross-listed shares in U.S. markets relative to their home-market shares on a currency-adjusted basis...
- White papers 2003-10-20
- Three Kinds of Savings Labor Arbitrage: How the Numbers Work
- BPO is gaining significant traction in the outsourcing marketplace because of new components that create additional levels of value. Americans are discovering that not all talent on the planet resides in the United States. Major companies using offshore resources include technology companies; call center support and financial services companies. Labor...
- White papers 2003-09-01
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