In economics and finance, arbitrage ( /ˈɑrbɨtrɑːʒ/) is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit at zero cost.

In principle and in academic use, an arbitrage is risk-free; in common use, as in statistical arbitrage, it may refer to expected profit, though losses may occur, and in practice, there are always risks in arbitrage, some minor (such as fluctuation of prices decreasing profit margins), some major (such as devaluation of a currency or derivative). In academic use, an arbitrage involves taking advantage of differences in price of a single asset or identical cash-flows; in common use, it is also used to refer to differences between similar assets (relative value or convergence trades), as in merger arbitrage.

People who engage in arbitrage are called arbitrageurs (IPA /ˌɑrbɨtrɑːˈʒɜr/)—such as a bank or brokerage firm. The term is mainly applied to trading in financial instruments, such as bonds, stocks, derivatives, commodities and currencies.

Arbitrage-free[link]

If the market prices do not allow for profitable arbitrage, the prices are said to constitute an arbitrage equilibrium or arbitrage-free market. An arbitrage equilibrium is a precondition for a general economic equilibrium. The assumption that there is no arbitrage is used in quantitative finance to calculate a unique risk neutral price for derivatives.

Conditions for arbitrage[link]

Arbitrage is possible when one of three conditions is met:

1. The same asset does not trade at the same price on all markets ("the law of one price").
2. Two assets with identical cash flows do not trade at the same price.
3. An asset with a known price in the future does not today trade at its future price discounted at the risk-free interest rate (or, the asset does not have negligible costs of storage; as such, for example, this condition holds for grain but not for securities).

Arbitrage is not simply the act of buying a product in one market and selling it in another for a higher price at some later time. The transactions must occur simultaneously to avoid exposure to market risk, or the risk that prices may change on one market before both transactions are complete. In practical terms, this is generally possible only with securities and financial products that can be traded electronically, and even then, when each leg of the trade is executed the prices in the market may have moved. Missing one of the legs of the trade (and subsequently having to trade it soon after at a lower price) is called 'execution risk' or more specifically 'leg risk'.^{[note 1]}

In the simplest example, any good sold in one market should sell for the same price in another. Traders may, for example, find that the price of wheat is lower in agricultural regions than in cities, purchase the good, and transport it to another region to sell at a higher price. This type of price arbitrage is the most common, but this simple example ignores the cost of transport, storage, risk, and other factors. "True" arbitrage requires that there be no market risk involved. Where securities are traded on more than one exchange, arbitrage occurs by simultaneously buying in one and selling on the other.

See rational pricing, particularly arbitrage mechanics, for further discussion.

Mathematically it is defined as follows:

Failed to parse (Missing texvc executable; please see math/README to configure.): P(V_t \geq 0) = 1

and Failed to parse (Missing texvc executable; please see math/README to configure.): P(V_t \neq 0) > 0

where Failed to parse (Missing texvc executable; please see math/README to configure.): V_0 = 0

and Failed to parse (Missing texvc executable; please see math/README to configure.): V_t
denotes the portfolio value at time t.

Examples[link]

• Suppose that the exchange rates (after taking out the fees for making the exchange) in London are £5 = $10 = ¥1000 and the exchange rates in Tokyo are ¥1000 = $12 = £6. Converting ¥1000 to $12 in Tokyo and converting that $12 into ¥1200 in London, for a profit of ¥200, would be arbitrage. In reality, this "triangle arbitrage" is so simple that it almost never occurs. But more complicated foreign exchange arbitrages, such as the spot-forward arbitrage (see interest rate parity) are much more common.
• One example of arbitrage involves the New York Stock Exchange and the Security Futures Exchange OneChicago (OCX). When the price of a stock on the NYSE and its corresponding futures contract on OCX are out of sync, one can buy the less expensive one and sell it to the more expensive market. Because the differences between the prices are likely to be small (and not to last very long), this can be done profitably only with computers examining a large number of prices and automatically exercising a trade when the prices are far enough out of balance. The activity of other arbitrageurs can make this risky. Those with the fastest computers and the most expertise take advantage of series of small differences that would not be profitable if taken individually.
• Economists use the term "global labor arbitrage" to refer to the tendency of manufacturing jobs to flow towards whichever country has the lowest wages per unit output at present and has reached the minimum requisite level of political and economic development to support industrialization. At present, many such jobs appear to be flowing towards China, though some that require command of English are going to India and the Philippines. In popular terms, this is referred to as offshoring. (Note that "offshoring" is not synonymous with "outsourcing", which means "to subcontract from an outside supplier or source", such as when a business outsources its bookkeeping to an accounting firm. Unlike offshoring, outsourcing always involves subcontracting jobs to a different company, and that company can be in the same country as the outsourcing company.)
• Sports arbitrage – numerous internet bookmakers offer odds on the outcome of the same event. Any given bookmaker will weight their odds so that no one customer can cover all outcomes at a profit against their books. However, in order to remain competitive they must keep margins usually quite low. Different bookmakers may offer different odds on the same outcome of a given event; by taking the best odds offered by each bookmaker, a customer can under some circumstances cover all possible outcomes of the event and lock a small risk-free profit, known as a Dutch book. This profit will typically be between 1% and 5% but can be much higher. One problem with sports arbitrage is that bookmakers sometimes make mistakes and this can lead to an invocation of the 'palpable error' rule, which most bookmakers invoke when they have made a mistake by offering or posting incorrect odds. As bookmakers become more proficient, the odds of making an 'arb' usually last for less than an hour and typically only a few minutes. Furthermore, huge bets on one side of the market also alert the bookies to correct the market.
• Exchange-traded fund arbitrage – Exchange Traded Funds allow authorized participants to exchange back and forth between shares in underlying securities held by the fund and shares in the fund itself, rather than allowing the buying and selling of shares in the ETF directly with the fund sponsor. ETFs trade in the open market, with prices set by market demand. An ETF may trade at a premium or discount to the value of the underlying assets. When a significant enough premium appears, an arbitrageur will buy the underlying securities, convert them to shares in the ETF, and sell them in the open market. When a discount appears, an arbitrageur will do the reverse. In this way, the arbitrageur makes a low-risk profit, while keeping ETF prices in line with their underlying value.
• Some types of hedge funds make use of a modified form of arbitrage to profit. Rather than exploiting price differences between identical assets, they will purchase and sell securities, assets and derivatives with similar characteristics, and hedge any significant differences between the two assets. Any difference between the hedged positions represents any remaining risk (such as basis risk) plus profit; the belief is that there remains some difference which, even after hedging most risk, represents pure profit. For example, a fund may see that there is a substantial difference between U.S. dollar debt and local currency debt of a foreign country, and enter into a series of matching trades (including currency swaps) to arbitrage the difference, while simultaneously entering into credit default swaps to protect against country risk and other types of specific risk.

Price convergence[link]

Arbitrage has the effect of causing prices in different markets to converge. As a result of arbitrage, the currency exchange rates, the price of commodities, and the price of securities in different markets tend to converge. The speed at which they do so is a measure of market efficiency. Arbitrage tends to reduce price discrimination by encouraging people to buy an item where the price is low and resell it where the price is high (as long as the buyers are not prohibited from reselling and the transaction costs of buying, holding and reselling are small relative to the difference in prices in the different markets).

Arbitrage moves different currencies toward purchasing power parity. As an example, assume that a car purchased in the United States is cheaper than the same car in Canada. Canadians would buy their cars across the border to exploit the arbitrage condition. At the same time, Americans would buy US cars, transport them across the border, then sell them in Canada. Canadians would have to buy American dollars to buy the cars and Americans would have to sell the Canadian dollars they received in exchange. Both actions would increase demand for US dollars and supply of Canadian dollars. As a result, there would be an appreciation of the US currency. This would make US cars more expensive and Canadian cars less so until their prices were similar. On a larger scale, international arbitrage opportunities in commodities, goods, securities and currencies tend to change exchange rates until the purchasing power is equal.

In reality, most assets exhibit some difference between countries. These, transaction costs, taxes, and other costs provide an impediment to this kind of arbitrage. Similarly, arbitrage affects the difference in interest rates paid on government bonds issued by the various countries, given the expected depreciations in the currencies relative to each other (see interest rate parity).

Risks[link]

Arbitrage transactions in modern securities markets involve fairly low day-to-day risks, but can face extremely high risk in rare situations, particularly financial crises, and can lead to bankruptcy. Formally, arbitrage transactions have negative skew – prices can get a small amount closer (but often no closer than 0), while they can get very far apart. The day-to-day risks are generally small because the transactions involve small differences in price, so an execution failure will generally cause a small loss (unless the trade is very big or the price moves rapidly). The rare case risks are extremely high because these small price differences are converted to large profits via leverage (borrowed money), and in the rare event of a large price move, this may yield a large loss.

The main day-to-day risk is that part of the transaction fails – execution risk. The main rare risks are counterparty risk and liquidity risk – that a counterparty to a large transaction or many transactions fails to pay, or that one is required to post margin and does not have the money to do so.

In the academic literature, the idea that seemingly very low risk arbitrage trades might not be fully exploited because of these risk factors and other considerations is often referred to as limits to arbitrage.^[1][2][3]

Execution risk[link]

Generally it is impossible to close two or three transactions at the same instant; therefore, there is the possibility that when one part of the deal is closed, a quick shift in prices makes it impossible to close the other at a profitable price. However, this is not necessarily the case. Many exchanges and inter-dealer brokers allow multi legged trades (e.g. basis block trades on LIFFE).

Competition in the marketplace can also create risks during arbitrage transactions. As an example, if one was trying to profit from a price discrepancy between IBM on the NYSE and IBM on the London Stock Exchange, they may purchase a large number of shares on the NYSE and find that they cannot simultaneously sell on the LSE. This leaves the arbitrageur in an unhedged risk position.

In the 1980s, risk arbitrage was common. In this form of speculation, one trades a security that is clearly undervalued or overvalued, when it is seen that the wrong valuation is about to be corrected by events. The standard example is the stock of a company, undervalued in the stock market, which is about to be the object of a takeover bid; the price of the takeover will more truly reflect the value of the company, giving a large profit to those who bought at the current price—if the merger goes through as predicted. Traditionally, arbitrage transactions in the securities markets involve high speed, high volume and low risk. At some moment a price difference exists, and the problem is to execute two or three balancing transactions while the difference persists (that is, before the other arbitrageurs act). When the transaction involves a delay of weeks or months, as above, it may entail considerable risk if borrowed money is used to magnify the reward through leverage. One way of reducing the risk is through the illegal use of inside information, and in fact risk arbitrage with regard to leveraged buyouts was associated with some of the famous financial scandals of the 1980s such as those involving Michael Milken and Ivan Boesky.

Mismatch[link]

Another risk occurs if the items being bought and sold are not identical and the arbitrage is conducted under the assumption that the prices of the items are correlated or predictable; this is more narrowly referred to as a convergence trade. In the extreme case this is merger arbitrage, described below. In comparison to the classical quick arbitrage transaction, such an operation can produce disastrous losses.

Counterparty risk[link]

As arbitrages generally involve future movements of cash, they are subject to counterparty risk: if a counterparty fails to fulfill their side of a transaction. This is a serious problem if one has either a single trade or many related trades with a single counterparty, whose failure thus poses a threat, or in the event of a financial crisis when many counterparties fail. This hazard is serious because of the large quantities one must trade in order to make a profit on small price differences.

For example, if one purchases many risky bonds, then hedges them with CDSes, profiting from the difference between the bond spread and the CDS premium, in a financial crisis the bonds may default and the CDS writer/seller may itself fail, due to the stress of the crisis, causing the arbitrageur to face steep losses.

Liquidity risk[link]

Arbitrage trades are necessarily synthetic, leveraged trades, as they involve a short position. If the assets used are not identical (so a price divergence makes the trade temporarily lose money), or the margin treatment is not identical, and the trader is accordingly required to post margin (faces a margin call), the trader may run out of capital (if they run out of cash and cannot borrow more) and go bankrupt even though the trades may be expected to ultimately make money. In effect, arbitrage traders synthesize a put option on their ability to finance themselves.^[4]

Prices may diverge during a financial crisis, often termed a "flight to quality"; these are precisely the times when it is hardest for leveraged investors to raise capital (due to overall capital constraints), and thus they will lack capital precisely when they need it most.^[4]

Types of arbitrage[link]

Merger arbitrage[link]

Also called risk arbitrage, merger arbitrage generally consists of buying the stock of a company that is the target of a takeover while shorting the stock of the acquiring company.

Usually the market price of the target company is less than the price offered by the acquiring company. The spread between these two prices depends mainly on the probability and the timing of the takeover being completed as well as the prevailing level of interest rates.

The bet in a merger arbitrage is that such a spread will eventually be zero, if and when the takeover is completed. The risk is that the deal "breaks" and the spread massively widens.

Municipal bond arbitrage[link]

Also called municipal bond relative value arbitrage, municipal arbitrage, or just muni arb, this hedge fund strategy involves one of two approaches.

Generally, managers seek relative value opportunities by being both long and short municipal bonds with a duration-neutral book. The relative value trades may be between different issuers, different bonds issued by the same entity, or capital structure trades referencing the same asset (in the case of revenue bonds). Managers aim to capture the inefficiencies arising from the heavy participation of non-economic investors (i.e., high income "buy and hold" investors seeking tax-exempt income) as well as the "crossover buying" arising from corporations' or individuals' changing income tax situations (i.e., insurers switching their munis for corporates after a large loss as they can capture a higher after-tax yield by offsetting the taxable corporate income with underwriting losses). There are additional inefficiencies arising from the highly fragmented nature of the municipal bond market which has two million outstanding issues and 50,000 issuers in contrast to the Treasury market which has 400 issues and a single issuer.

Second, managers construct leveraged portfolios of AAA- or AA-rated tax-exempt municipal bonds with the duration risk hedged by shorting the appropriate ratio of taxable corporate bonds. These corporate equivalents are typically interest rate swaps referencing Libor or SIFMA[1] [2]. The arbitrage manifests itself in the form of a relatively cheap longer maturity municipal bond, which is a municipal bond that yields significantly more than 65% of a corresponding taxable corporate bond. The steeper slope of the municipal yield curve allows participants to collect more after-tax income from the municipal bond portfolio than is spent on the interest rate swap; the carry is greater than the hedge expense. Positive, tax-free carry from muni arb can reach into the double digits. The bet in this municipal bond arbitrage is that, over a longer period of time, two similar instruments—municipal bonds and interest rate swaps—will correlate with each other; they are both very high quality credits, have the same maturity and are denominated in U.S. dollars. Credit risk and duration risk are largely eliminated in this strategy. However, basis risk arises from use of an imperfect hedge, which results in significant, but range-bound principal volatility. The end goal is to limit this principal volatility, eliminating its relevance over time as the high, consistent, tax-free cash flow accumulates. Since the inefficiency is related to government tax policy, and hence is structural in nature, it has not been arbitraged away.

Note, however, that many municipal bonds are callable, and that this imposes substantial additional risks to the strategy.

Convertible bond arbitrage[link]

A convertible bond is a bond that an investor can return to the issuing company in exchange for a predetermined number of shares in the company.

A convertible bond can be thought of as a corporate bond with a stock call option attached to it.

The price of a convertible bond is sensitive to three major factors:

• interest rate. When rates move higher, the bond part of a convertible bond tends to move lower, but the call option part of a convertible bond moves higher (and the aggregate tends to move lower).
• stock price. When the price of the stock the bond is convertible into moves higher, the price of the bond tends to rise.
• credit spread. If the creditworthiness of the issuer deteriorates (e.g. rating downgrade) and its credit spread widens, the bond price tends to move lower, but, in many cases, the call option part of the convertible bond moves higher (since credit spread correlates with volatility).

Given the complexity of the calculations involved and the convoluted structure that a convertible bond can have, an arbitrageur often relies on sophisticated quantitative models in order to identify bonds that are trading cheap versus their theoretical value.

Convertible arbitrage consists of buying a convertible bond and hedging two of the three factors in order to gain exposure to the third factor at a very attractive price.

For instance an arbitrageur would first buy a convertible bond, then sell fixed income securities or interest rate futures (to hedge the interest rate exposure) and buy some credit protection (to hedge the risk of credit deterioration). Eventually what he'd be left with is something similar to a call option on the underlying stock, acquired at a very low price. He could then make money either selling some of the more expensive options that are openly traded in the market or delta hedging his exposure to the underlying shares.

Depository receipts[link]

A depository receipt is a security that is offered as a "tracking stock" on another foreign market. For instance a Chinese company wishing to raise more money may issue a depository receipt on the New York Stock Exchange, as the amount of capital on the local exchanges is limited. These securities, known as ADRs (American Depositary Receipt) or GDRs (Global Depositary Receipt) depending on where they are issued, are typically considered "foreign" and therefore trade at a lower value when first released. Many ADR's are exchangeable into the original security (known as fungibility) and actually have the same value. In this case there is a spread between the perceived value and real value, which can be extracted. Other ADR's that are not exchangeable often have much larger spreads. Since the ADR is trading at a value lower than what it is worth, one can purchase the ADR and expect to make money as its value converges on the original. However there is a chance that the original stock will fall in value too, so by shorting it one can hedge that risk.

Dual-listed companies[link]

A dual-listed company (DLC) structure involves two companies incorporated in different countries contractually agreeing to operate their businesses as if they were a single enterprise, while retaining their separate legal identity and existing stock exchange listings. In integrated and efficient financial markets, stock prices of the twin pair should move in lockstep. In practice, DLC share prices exhibit large deviations from theoretical parity. Arbitrage positions in DLCs can be set up by obtaining a long position in the relatively underpriced part of the DLC and a short position in the relatively overpriced part. Such arbitrage strategies start paying off as soon as the relative prices of the two DLC stocks converge toward theoretical parity. However, since there is no identifiable date at which DLC prices will converge, arbitrage positions sometimes have to be kept open for considerable periods of time. In the meantime, the price gap might widen. In these situations, arbitrageurs may receive margin calls, after which they would most likely be forced to liquidate part of the position at a highly unfavorable moment and suffer a loss. Arbitrage in DLCs may be profitable, but is also very risky, see.^[5] Background material is available at [3].

A good illustration of the risk of DLC arbitrage is the position in Royal Dutch Shell—which had a DLC structure until 2005—by the hedge fund Long-Term Capital Management (LTCM, see also the discussion below). Lowenstein (2000) ^[6] describes that LTCM established an arbitrage position in Royal Dutch Shell in the summer of 1997, when Royal Dutch traded at an 8 to 10 percent premium. In total $2.3 billion was invested, half of which long in Shell and the other half short in Royal Dutch (Lowenstein, p. 99). In the autumn of 1998 large defaults on Russian debt created significant losses for the hedge fund and LTCM had to unwind several positions. Lowenstein reports that the premium of Royal Dutch had increased to about 22 percent and LTCM had to close the position and incur a loss. According to Lowenstein (p. 234), LTCM lost $286 million in equity pairs trading and more than half of this loss is accounted for by the Royal Dutch Shell trade.

Private to public equities[link]

The market prices for privately held companies are typically viewed from a return on investment perspective (such as 25%), whilst publicly held and or exchange listed companies trade on a Price to earnings ratio (P/E) (such as a P/E of 10, which equates to a 10% ROI). Thus, if a publicly traded company specialises in the acquisition of privately held companies, from a per-share perspective there is a gain with every acquisition that falls within these guidelines. Exempli gratia, Berkshire-Hathaway. A hedge fund that is an example of this type of arbitrage is Greenridge Capital, which acts as an angel investor retaining equity in private companies which are in the process of becoming publicly traded, buying in the private market and later selling in the public market. Private to public equities arbitrage is a term which can arguably be applied to investment banking in general. Private markets to public markets differences may also help explain the overnight windfall gains enjoyed by principals of companies that just did an initial public offering (IPO).

Regulatory arbitrage[link]

Regulatory arbitrage is where a regulated institution takes advantage of the difference between its real (or economic) risk and the regulatory position. For example, if a bank, operating under the Basel I accord, has to hold 8% capital against default risk, but the real risk of default is lower, it is profitable to securitise the loan, removing the low risk loan from its portfolio. On the other hand, if the real risk is higher than the regulatory risk then it is profitable to make that loan and hold on to it, provided it is priced appropriately.

This process can increase the overall riskiness of institutions under a risk insensitive regulatory regime, as described by Alan Greenspan in his October 1998 speech on The Role of Capital in Optimal Banking Supervision and Regulation.

Regulatory Arbitrage was used for the first time in 2005 when it was applied by Scott V. Simpson, a partner at law firm Skadden, Arps, to refer to a new defence tactic in hostile mergers and acquisitions where differing takeover regimes in deals involving multi-jurisdictions are exploited to the advantage of a target company under threat.

In economics, regulatory arbitrage (sometimes, tax arbitrage) may be used to refer to situations when a company can choose a nominal place of business with a regulatory, legal or tax regime with lower costs. For example, an insurance company may choose to locate in Bermuda due to preferential tax rates and policies for insurance companies. This can occur particularly where the business transaction has no obvious physical location: in the case of many financial products, it may be unclear "where" the transaction occurs.

Regulatory arbitrage can include restructuring a bank by outsourcing services such as IT. The outsourcing company takes over the installations, buying out the bank's assets and charges a periodic service fee back to the bank. This frees up cashflow usable for new lending by the bank. The bank will have higher IT costs, but counts on the multiplier effect of money creation and the interest rate spread to make it a profitable exercise.

Example: Suppose the bank sells its IT installations for 40 million USD. With a reserve ratio of 10%, the bank can create 400 million USD in additional loans (there is a time lag, and the bank has to expect to recover the loaned money back into its books). The bank can often lend (and securitize the loan) to the IT services company to cover the acquisition cost of the IT installations. This can be at preferential rates, as the sole client using the IT installation is the bank. If the bank can generate 5% interest margin on the 400 million of new loans, the bank will increase interest revenues by 20 million. The IT services company is free to leverage their balance sheet as aggressively as they and their banker agree to. This is the reason behind the trend towards outsourcing in the financial sector. Without this money creation benefit, it is actually more expensive to outsource the IT operations as the outsourcing adds a layer of management and increases overhead.

Telecom arbitrage[link]

Telecom arbitrage companies allow phone users to make international calls for free through certain access numbers. Such services are offered in the United Kingdom; the telecommunication arbitrage companies get paid an interconnect charge by the UK mobile networks and then buy international routes at a lower cost. The calls are seen as free by the UK contract mobile phone customers since they are using up their allocated monthly minutes rather than paying for additional calls.

Such services were previously offered in the United States by companies such as FuturePhone.com.^[7] These services would operate in rural telephone exchanges, primarily in small towns in the state of Iowa. In these areas, the local telephone carriers are allowed to charge a high "termination fee" to the caller's carrier in order to fund the cost of providing service to the small and sparsely populated areas that they serve. However, FuturePhone (as well as other similar services) ceased operations upon legal challenges from AT&T and other service providers.^[8]

Statistical arbitrage[link]

Statistical arbitrage is an imbalance in expected nominal values. A casino has a statistical arbitrage in every game of chance that it offers—referred to as the house advantage, house edge, vigorish or house vigorish.

The debacle of Long-Term Capital Management[link]

Long-Term Capital Management (LTCM) lost 4.6 billion U.S. dollars in fixed income arbitrage in September 1998. LTCM had attempted to make money on the price difference between different bonds. For example, it would sell U.S. Treasury securities and buy Italian bond futures. The concept was that because Italian bond futures had a less liquid market, in the short term Italian bond futures would have a higher return than U.S. bonds, but in the long term, the prices would converge. Because the difference was small, a large amount of money had to be borrowed to make the buying and selling profitable.

The downfall in this system began on August 17, 1998, when Russia defaulted on its ruble debt and domestic dollar debt. Because the markets were already nervous due to the Asian financial crisis, investors began selling non-U.S. treasury debt and buying U.S. treasuries, which were considered a safe investment. As a result the price on US treasuries began to increase and the return began decreasing because there were many buyers, and the return (yield) on other bonds began to increase because there were many sellers (i.e. the price of those bonds fell). This caused the difference between the prices of U.S. treasuries and other bonds to increase, rather than to decrease as LTCM was expecting. Eventually this caused LTCM to fold, and their creditors had to arrange a bail-out. More controversially, officials of the Federal Reserve assisted in the negotiations that led to this bail-out, on the grounds that so many companies and deals were intertwined with LTCM that if LTCM actually failed, they would as well, causing a collapse in confidence in the economic system. Thus LTCM failed as a fixed income arbitrage fund, although it is unclear what sort of profit was realized by the banks that bailed LTCM out.

Etymology[link]

"Arbitrage" is a French word and denotes a decision by an arbitrator or arbitration tribunal. (In modern French, "arbitre" usually means referee or umpire.) In the sense used here it is first defined in 1704 by Mathieu de la Porte in his treatise "La science des négocians et teneurs de livres" as a consideration of different exchange rates to recognize the most profitable places of issuance and settlement for a bill of exchange ("L'arbitrage est une combinaison que l’on fait de plusieurs changes, pour connoitre [connaître, in modern spelling] quelle place est plus avantageuse pour tirer et remettre".)^[9]

See also[link]

Types of financial arbitrage[link]

• Arbitrage betting
• Covered interest arbitrage
• Fixed income arbitrage
• Political arbitrage
• Risk arbitrage
• Statistical arbitrage
• Triangular arbitrage
• Uncovered interest arbitrage
• Volatility arbitrage

Related concepts[link]

• Algorithmic trading
• Arbitrage pricing theory
• Coherence (philosophical gambling strategy), analogous concept in Bayesian probability
• Efficient market hypothesis
• Immunization (finance)
• Interest rate parity
• Intermediation
• No free lunch with vanishing risk
• TANSTAAFL
• Value investing

Notes[link]

References[link]

External links[link]

Look up arbitrage in Wiktionary, the free dictionary.

• What is Arbitrage? (About.com)
• ArbitrageView.com – Arbitrage opportunities in pending merger deals in the U.S. market
• Information on arbitrage in dual-listed companies on the website of Mathijs A. van Dijk.
• What is Regulatory Arbitrage. Regulatory Arbitrage after the Basel ii framework and the 8th Company Law Directive of the European Union.
• Institute for Arbitrage.

Richard Gere
Gere in Venice, 2007
Born	Richard Tiffany Gere (1949-08-31) August 31, 1949 (age 62) Philadelphia, Pennsylvania, U.S.
Nationality	American
Occupation	Actor
Years active	1973–present
Notable work(s)	Pretty Woman, Dr. T & the Women, Chicago, Primal Fear, First Knight
Religion	Buddhist
Spouse	Cindy Crawford (1991–1995) Carey Lowell (2002–present)
Children	Son

Richard Tiffany Gere^[1] ( /ˈɡɪər/ GEER; born August 31, 1949) is an American actor. He began acting in the 1970s, playing a supporting role in Looking for Mr. Goodbar, and a starring role in Days of Heaven. He came to prominence in 1980 for his role in the film American Gigolo, which established him as a leading man and a sex symbol. He went on to star in several hit films including An Officer and a Gentleman, Pretty Woman, Primal Fear, and Chicago, for which he won a Golden Globe Award as Best Actor, as well as a Screen Actors Guild Award as part of the Best Cast.

Early life[link]

Born in Philadelphia, Pennsylvania, Gere is a descendant of Mayflower Pilgrims Francis Eaton, John Billington, George Soule, Richard Warren, Degory Priest, William Brewster, and Francis Cooke.^[1] His paternal great-grandfather had changed the spelling of the surname from "Geer".^[1] Gere's mother, Doris Ann (née Tiffany, born 1924),^[1] was a homemaker, and his father, Homer George Gere (born 1922),^[1] was an insurance agent for the Nationwide Mutual Insurance Company and had originally intended to become a minister.^[2] Gere is their eldest son and second child.^[1] In 1967, he graduated from North Syracuse Central High School, where he excelled at gymnastics and music, playing the trumpet.^[2] He attended the University of Massachusetts Amherst on a gymnastics scholarship, majoring in philosophy, but did not graduate, leaving after two years.^[2][3]

Career[link]

Gere first worked professionally at the Provincetown Playhouse on Cape Cod in 1971 where he starred in Rosencrantz and Guildenstern Are Dead. His first major acting role was in the original London stage version of Grease in 1973.^[2] He began appearing in Hollywood films in the mid 1970s, co-starring in the thriller Looking for Mr. Goodbar (1977) and playing the leading role in director Terrence Malick's well-reviewed 1978 film, Days of Heaven.^[2] In 1980, Gere appeared in the Broadway production of Bent. He became a major star that year with the film American Gigolo, followed by the romantic drama An Officer and a Gentleman, which grossed almost $130 million in 1982.^[4]

After 1982, Gere's career experienced several box office failures^[5][6] until it strengthened with the release of both Internal Affairs and Pretty Woman in 1990. Gere's status as a leading man solidified and he went on to star in several successful films throughout the 1990s, including Sommersby (1993), Primal Fear (1996), and Runaway Bride (1999) which reunited him with his Pretty Woman co-star Julia Roberts.^[5] Richard also took a leading role in the 1997 action movie The Jackal, playing Declan Mulqueen.

People magazine named Gere the "Sexiest Man Alive" in 1999. In 2002, he appeared in three major releases: the horror thriller The Mothman Prophecies, the drama Unfaithful, and the Academy Award-winning film version of Chicago,^[2] for which he won a Golden Globe as "Best Actor – Comedy or Musical". Gere's 2004 ballroom dancing drama Shall We Dance? was also a solid performer that grossed $170 million worldwide^[7] though his next film, 2005's Bee Season, was a commercial failure.^[8]

Gere was Harvard University's Hasty Pudding Theatricals' "Man of the Year" for 2006. In 2007, he co-starred with Jesse Eisenberg and Terrence Howard in The Hunting Party, a comic thriller in which he played a journalist in Bosnia. The same year he also starred with Christian Bale, Heath Ledger, and Cate Blanchett in Todd Haynes' semi-biographical film about Bob Dylan, I'm Not There.

Gere co-starred with Diane Lane in the romantic drama Nights in Rodanthe, released in 2008. The film was widely panned by critics^[9] (even making #74 on The Times Worst Films of 2008 list),^[10] but grossed over $84 million worldwide.^[11]

In December 2010, Gere was honored for his lifetime achievement from the 34th Cairo International Film Festival.^[12]

In 2012, Gere was the 67th recipient of The George Eastman Award for distinguished contribution to the art of film for his distinguished acting career as well as his global humanitarian leadership.

Personal life and activism[link]

Gere presented with a Khata by the 14th Dalai Lama

Gere was married to supermodel Cindy Crawford from 1991 to 1995. In 2002, he married model and actress Carey Lowell. They have a son, Homer James Jigme Gere, who was born in 2000 and is named after Gere's father.^[2]

Gere was raised by Methodist parents;^[13] his interest in Buddhism began when in his twenties.^[14] Gere first studied Zen Buddhism^[14] under Kyozan Joshu Sasaki.^[14] After having studied Zen for five or six years,^[14] Gere traveled to Nepal in 1978 with the Brazilian painter, Sylvia Martins^[15] where he met many Tibetan monks and lamas.^[15] He then met the 14th Dalai Lama in India^[14] and became a practicing Buddhist of the Gelugpa school of Tibetan Buddhism^[14] and an active supporter of the Dalai Lama.^[2] Gere visits Dharamsala, the headquarters of the Tibetan government-in-exile, regularly.^[16]

Gere is also a persistent advocate for human rights in Tibet; he is a co-founder of the Tibet House, creator of The Gere Foundation, and he is Chairman of the Board of Directors for the International Campaign for Tibet. Because he strongly supports the Tibetan Independence Movement, he is permanently banned from entering the People's Republic of China.^[17][18] Gere was banned as an Academy Award presenter in 1993 after he denounced the Chinese government in his capacity as presenter.^[19][20] In September 2007, Gere called for the boycott of the 2008 Beijing Olympic Games to put pressure on China to make Tibet independent. He starred in Free Tibet-themed Lancia commercial featuring the Lancia Delta.^[21] On June 27, 2011 Richard Gere meditated in Borobudur temple.^[22]

Gere Visits USAID HIV / AIDS "Operation Lighthouse" Project In Mumbai, as part of USAID.

Richard Gere actively supports Survival International, an organization dedicated to protecting the rights and lands of tribal peoples throughout the world.^[15] He contributed some of his writing for the book, We Are One: A Celebration of Tribal Peoples, released in October 2009.^[23] Richard Gere discusses the persecution and loss of land of the Jummas, as an example of a tragic story that repeats itself in different continents of the world. He calls attention to the crime against their peaceful culture and how it reflects on our own relationship with nature and capacity to survive.^[24] The royalties from the sale of this book go to the indigenous rights organization, Survival International.

Gere campaigns for ecological causes and AIDS awareness. He currently serves on the Board of Directors for Healing the Divide, an organization that supports global initiatives to promote peace, justice and understanding.^[25] He helped to establish the AIDS Care Home, a residential facility in India for women and children with AIDS, and also supports campaigns for AIDS awareness and education that country. In 1999, he created the Gere Foundation India Trust to support a variety of humanitarian programs in India.^[26]

On April 15, 2007, Gere appeared at an AIDS awareness rally in Jaipur, India. During a live news conference to promote condom use among truck drivers, he embraced Bollywood superstar Shilpa Shetty, dipped her, and kissed her several times on the cheek.^[27] As a result of that gesture, a local court ordered the arrest of Gere and Shetty, finding them in violation "public obscenity" laws. Gere, who quickly fled the country, has said the controversy was "manufactured by a small hard-line political party." About a month later, a two-judge bench headed by the Chief Justice of India, KG Balakrishnan, described the case as "frivolous" and believed that such complaints (against celebrities) were filed for "cheap publicity" and have brought a bad name to the country. They ruled that "Richard Gere is free to enter the country. This is the end of the matter."^[28]

In June 2008, Gere appeared in a Fiat commercial for the European market, driving a new Lancia Delta from Hollywood to Tibet. The commercial concluded with a tagline of "New Lancia Delta: the power to be different". The commercial was reported in Chinese newspapers, and Fiat apologized to the PRC.^[29] Branding expert John Tantillo argued that Fiat had foreseen the controversy the ad would cause and hoped to benefit from press coverage it would receive, labeling it "adpublitizing".^[30]

Honours and awards[link]

On 17 May 2012 Albanian President, Bamir Topi awarded with the "Medal of Gratitude" Mr. Richard Gere with citation: "With gratitude and honor outstanding personality of the world art, great humanist and activist for the protection of human rights, which unmasked and the American public made ​​known, and further, inhuman crimes, ethnic cleansing in Kosovo, in 1999, the Serbian military machine against the Albanian civilian population living in its land".^[31]

Political views[link]

Invasion of Iraq[link]

Gere has stated that the decision to go to war in Iraq was one that the American people were not in support of and that the administration at the time “bullied” Americans into the decision. He blamed the situation on a very “poor president”.^[32]

“I'm very sorry about what the U.S. has done in Iraq. This war has been a tragedy for everyone. I hope that the people of Iraq can rebuild their country," Richard Gere said in a press conference, held on the sidelines of the 34th Cairo International Film Festival.^[33]

Filmography[link]

References[link]

External links[link]

Wikimedia Commons has media related to: Richard Gere

• Richard Gere at the Internet Movie Database
• Richard Gere at the Internet Broadway Database
• Richard Gere at the Internet Off-Broadway Database
• Defended India's nuclear tests
• The Gere Foundation
• The Druk White Lotus School (external link) of which Gere is an Honorary Patron.
• Shambhala Sun Interview

Susan Sarandon
Sarandon at the 2008 Tribeca Film Festival
Born	Susan Abigail Tomalin (1946-10-04) October 4, 1946 (age 65) New York City, New York, U.S.
Occupation	Actress
Years active	1969–present
Spouse	Chris Sarandon (1967–1979)
Partner	Tim Robbins (1988–2009)
Children	3

Susan Sarandon (born Susan Abigail Tomalin;^[1] October 4, 1946) is an American actress. She has worked in movies and television since 1969, and won an Academy Award for Best Actress for her performance in the 1995 film Dead Man Walking. She had also been nominated for the award for four films before that and has received other recognition for her work. She is also noted for her social and political activism for a variety of liberal causes.

Early life[link]

Sarandon was born Susan Abigail Tomalin in New York City to a Roman Catholic family.^[2] She is the eldest of nine children of Lenora Marie (née Criscione) and Phillip Leslie Tomalin, who worked as an advertising executive, television producer, and nightclub singer during the big band era.^[2][3][4] Her father was of English, Irish, and Welsh ancestry, his English ancestors being from Hackney in London. On her mother's side, she is of Italian descent, with ancestors from the regions of Tuscany and Sicily.^[2][5][6] Sarandon attended Roman Catholic schools.^{[citation needed]} She grew up in Edison, New Jersey,^[7][8] where she graduated from Edison High School in 1964.^[9][10] She then attended The Catholic University of America, from 1964 to 1968,^[11] where she began dating actor Chris Sarandon whom she married in 1967.

Career[link]

In 1969, Sarandon went to a casting call for the motion picture Joe, with her then-husband Chris Sarandon. Although he did not get a part, she was cast in a major role of a disaffected teen who disappears into the seedy underworld.^{[clarification needed]} (The film was released in 1970). Between the years 1970 and 1972, Sarandon played Patrice Kahlman on the short-lived soap opera A World Apart, and on Search for Tomorrow, in the role of Sarah Fairbanks. She appeared in Fleur bleue (The Apprentice) (1971) and also appeared in Lady Liberty (1971), by Mario Monicelli, opposite Sophia Loren.

In 1974, Sarandon co-starred in The Front Page with the comedy duo Jack Lemmon and Walter Matthau and Lovin' Molly with Anthony Perkins. She appeared in the cult favorite musical The Rocky Horror Picture Show (1975). That same year, she starred in The Great Waldo Pepper, opposite Robert Redford. In 1978, Sarandon played the mother of a child prostitute, who was played by Brooke Shields, in Pretty Baby.

Susan Sarandon's hand and foot prints at Grauman's Chinese Theatre

Sarandon played one of the leads in the 1987 dark comedy/fantasy film The Witches of Eastwick, opposite Jack Nicholson. Sarandon starred in the 1988 film Bull Durham, which became a huge commercial and critical success. In 1989, she co-starred with Marlon Brando in A Dry White Season. In 1990 she starred in the film White Palace with James Spader.

Sarandon has received five Academy Award nominations, for best actress, in Atlantic City (1980), Thelma & Louise (1991), Lorenzo's Oil (1992) and The Client (1994). In 1995, she won the award for her performance in Dead Man Walking.^{[citation needed]}.

In 1994, Sarandon was awarded the Women in Film Crystal Award.^[12]

Additional performances in film include Little Women (1994, Compromising Positions, Stepmom (1998), Anywhere but Here (1999), Cradle Will Rock (1999), The Banger Sisters (2002), Shall We Dance (2004), Alfie (2004), Romance & Cigarettes (2005), Elizabethtown (2005) and Enchanted (2007).

Sarandon has appeared in two episodes of The Simpsons, once as herself ("Bart Has Two Mommies") and another as a ballet teacher, "Homer vs. Patty and Selma". She has made appearances on comedies such as Friends, Malcolm in the Middle, Mad TV, Saturday Night Live, Chappelle's Show, 30 Rock, and Rescue Me.^{[citation needed]}

Sarandon has contributed the narration to some two dozen documentary films, many of which dealt with social and political issues;^{[citation needed]} in addition, she has served as the presenter on many installments of the PBS documentary series, Independent Lens. In 1999-2000, she hosted and presented Mythos, a series of lectures by the late American mythology professor Joseph Campbell.^[13] Sarandon also participates as a member of the Jury for the NYICFF, a local New York City Film Festival that is dedicated to screening films made for children between the ages of 3 and 18.^[14]

Sarandon joined the cast of the adaptation of The Lovely Bones, opposite Rachel Weisz, and appeared with her daughter, Eva Amurri, in Middle of Nowhere; both of the films were filmed in 2007.^[15][16]

In June 2010, Sarandon joined the cast of the new HBO pilot episode The Miraculous Year. She will play^[when?] the role of Patty Atwood, a Broadway director/choreographer.^[17]

In 2012, Sarandon's audiobook performance of Carson McCullers' The Member of the Wedding was released at Audible.com.^[18]

Personal life[link]

In 1964, Sarandon began dating actor Chris Sarandon while both were in college, and the couple married on September 16, 1967.^[19] Following their separation in 1978, Sarandon gave an interview to Cosmopolitan magazine, in which she stated "I no longer believe in marriage."^[20] They divorced in 1979 and she retained Sarandon as her stage name.^[21]

In the late 1970s, Sarandon had a two-year relationship with director Louis Malle, who directed her in Pretty Baby and Atlantic City.^[19]

In the mid-1980s, Sarandon dated Italian filmmaker Franco Amurri, with whom she had a daughter on March 15, 1985, actress Eva Amurri.^[21]

From 1988 to 2009, Sarandon was in a relationship with actor Tim Robbins, whom she met while they were filming Bull Durham. They have two sons — Jack Henry (born 1989) and Miles Guthrie (born 1992).^[21][22]

In 2006, Sarandon and ten of her relatives (including her then-partner Tim Robbins and her son Miles) travelled to Wales to trace her family's Welsh genealogy. Their journey was documented by the BBC Wales programme, Coming Home: Susan Sarandon.^[6] Much of the same research and content was also featured in the American version of Who Do You Think You Are?. In 2006, she also received the "Ragusani nel mondo" prize, since she had recently discovered her Sicilian roots, in Ragusa, Italy.^[23]

Sarandon is the co-owner of New York table tennis club SPiN.^[24][25]

Activism[link]

Sarandon is noted for her active support of progressive and left-liberal political causes, ranging from donations made to organizations such as EMILY's List,^[26] to participating in a 1983 delegation to Nicaragua sponsored by MADRE, an organization that promotes "social, environmental and economic justice."^[27] Sarandon has also expressed support for various human rights causes that are similar philosophically to ideas found among the Christian left.^[28]

In 1995, Sarandon was one of many Hollywood actors, directors and writers who were interviewed for the documentary The Celluloid Closet, which looked at how Hollywood films have depicted homosexuality. In 1999, she was appointed UNICEF Goodwill Ambassador. In that capacity, she has actively supported the organization's global advocacy, as well as the work of the Canadian UNICEF Committee.

Sarandon in April 2007

During the 2000 election, Sarandon supported Ralph Nader's run for President, serving as a co-chair of the National Steering Committee of Nader 2000.^[29]

During the 2004 election campaign, she withheld support for Nader's bid, being among several "Nader 2000 Leaders" who signed a petition that urged voters to vote for Democratic Party candidate John Kerry.^[30] After the 2004 election, Sarandon called for US elections to be monitored by international entities.^[31]

Sarandon and Robbins both took an early stance against the 2003 invasion of Iraq, with Sarandon stating that she was firmly against the concept of the war as a pre-emptive strike.^[32] Prior to a 2003 protest sponsored by the United for Peace and Justice coalition, she said that many Americans "do not want to risk their children or the children of Iraq".^[33] Sarandon was one of the first to appear in a series of political ads sponsored by TrueMajority, an organization established by Ben & Jerry's Ice Cream founder Ben Cohen.^[34][35] Also in 2003, Sarandon appeared in a "Love is Love is Love" commercial, which promoted the acceptance of gay, lesbian, bisexual and transgender individuals.

In 2004, Sarandon served on the advisory committee for the group 2004 Racism Watch.^[36] She hosted a section of the Live 8 concert in Edinburgh, Scotland, in 2005. In 2006, she was one of eight women selected to carry in the Olympic flag at the Opening Ceremony of the 2006 Olympic Winter Games, in Turin, Italy.

Along with anti-war activist Cindy Sheehan, Sarandon took part in a 2006 Mother's Day protest, which was sponsored by Code Pink;^[37] she has expressed interest in portraying Sheehan in a film.^[38] In January 2007, she appeared with Robbins and Jane Fonda at an anti-war rally in Washington, D.C. in support of a Congressional measure to withdraw U.S. forces from Iraq.^[39]

In the 2008 U.S. presidential election, Sarandon and Tim Robbins campaigned^[40] for John Edwards in the New Hampshire communities of Hampton,^[41] Bedford and Dover.^[42] When asked at We Vote '08 Kickoff Party "What would Jesus do this primary season", Sarandon said, "I think Jesus would be very supportive of John Edwards."^[43]

On March 12, 2011, Sarandon spoke before a crowd in Madison, Wisconsin during a protest of Governor Scott Walker and his "Budget Repair Bill".^[44]

On September 27, 2011, Sarandon spoke to reporters and other interested parties at the Occupy Wall Street protest in New York City.^[45][46]

After using the term "Nazi" in describing Pope Benedict XVI on October 15, 2011, she drew umbrage not only from Roman Catholic authorities,^[47] but also the Anti-Defamation League, which called on Sarandon to apologize.^[48]

Recognition[link]

In 2006, Sarandon received the Action Against Hunger Humanitarian Award.^[49] She was honored for her work as a UNICEF Goodwill Ambassador, an advocate for victims of hunger and HIV/AIDS and a spokesperson for Heifer International.

In 2010, Sarandon was inducted into the New Jersey Hall of Fame.^[50]

Filmography[link]