Multiple choice

In the Capital Market, the term arbitrage is used with reference to

  1. purchase of securities to cover the sale

  2. sale of securities to reduce the loss on purchase

  3. simultaneous purchase and sale of securities to make profits from price

  4. variation in different markets

  5. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Arbitrage in capital markets refers to the simultaneous purchase and sale of the same or equivalent securities in different markets to profit from price differences. It exploits market inefficiencies where the same asset trades at different prices. Option C accurately defines this concept.

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