index arbitrage

An investment/trading strategy that exploits divergences between actual and theoretical futures prices . An example is the simultaneous buying ( selling) of stock index futures ( i.e., S&P 500) while selling (buying) the underlying stocks of that index, capturing as profit the temporarily inflated basis between these two baskets. Often, the point at which profitability exists is expressed at the block call as the number of points the future must be over or under the underlying basket for an arbitrage opportunity to exist. Bloomberg Financial Dictionary
See: program trading. Bloomberg Financial Dictionary

Financial and business terms. 2012.

Look at other dictionaries:

  • Index arbitrage — is a subset of statistical arbitrage focusing on index components.The idea is that an index (such as S P 500 or Russell 2000) is made up of several components (in the example, the Top 500 US biggest firms by market capitalization) that influence… …   Wikipedia

  • Index Arbitrage — An investment strategy that attempts to profit from the differences between actual and theoretical futures prices of the same stock index. This is done by simultaneously buying (or selling) a stock index future while selling (or buying) the… …   Investment dictionary

  • index arbitrage — / ɪndeks ˌɑ:bɪtrɑ:ʒ/ noun buying or selling a basket of stocks against an index option or future …   Dictionary of banking and finance

  • Index arbitrage — An investment/trading strategy that exploits divergences between actual and theoretical futures prices. The New York Times Financial Glossary …   Financial and business terms

  • Arbitrage Trading Program - ATP — A computer program used to place simultaneous orders for stock or commodities futures and the underlying stocks or commodities, usually for large volume, institutional trades. One order will be a long or short position on a futures contract, and… …   Investment dictionary

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  • arbitrage — ar·bi·trage / är bə ˌträzh/ n [French, literally, arbitration, decision making] 1: the purchase of a security, commodity, or foreign currency in one market for the purpose of immediately selling it at a higher price in another market 2: the… …   Law dictionary

  • Arbitrage Pricing Model — Die Arbitragepreistheorie oder englisch Arbitrage Pricing Theory (APT) beschreibt eine Methode für die Bestimmung der Eigenkapitalkosten und die erwartete Rendite von Wertpapieren. Sie wurde maßgeblich von Stephen Ross entwickelt. Ross verwendete …   Deutsch Wikipedia

  • Arbitrage Pricing Theory — Die Arbitragepreistheorie oder englisch Arbitrage Pricing Theory (APT) beschreibt eine Methode für die Bestimmung der Eigenkapitalkosten und die erwartete Rendite von Wertpapieren. Sie wurde maßgeblich von Stephen Ross entwickelt. Ross verwendete …   Deutsch Wikipedia

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