Meaning 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. See: Program trading
More terms such as Index arbitrage in Dictionary I.
- Definition Interest Deduction:
- Examples An interest expense, such as interest on a margin account, that is allowed as a deduction for tax purposes index arbitrage definition.
- Definition Irrational Call Option:
- Examples imbedded in a MBS. Irrational because the call is sometimes not exercised when it is in the money (interest rates are below the threshold to refinance), and sometimes exercised when it is not in the index arbitrage explain.
- Definition Issued Share Capital:
- Examples Total amount of shares that have been issued. Related: Outstanding shares index arbitrage what is.
- Definition Information-Motivated Trades:
- Examples Trades in which an investor believes he or she possesses pertinent information not currently reflected in the stock's price index arbitrage meaning.
- Definition Initial Margin:
- Examples deposited by both buyers and sellers of futures contracts to ensure performance of the terms of the contract; (2) amount of cash or eligible securities required to be deposited with a broker before index arbitrage abbreviation.
