Arbitrage is the practice of taking advantage of price differences for the same asset or commodity in different markets, with the aim of making a profit by buying low and selling high.
Imagine you find a limited edition sneaker that is priced lower in one store compared to another. You buy it from the cheaper store and sell it at a higher price to collectors who are willing to pay more, making a profit through arbitrage.
Efficiency: In economics, efficiency refers to the optimal allocation of resources where no individual or entity can be made better off without making someone else worse off.
Speculation: Speculation involves taking risks in financial markets by buying or selling assets with the expectation of profiting from future price movements.
Foreign Exchange Market: The foreign exchange market is where currencies are bought and sold, providing opportunities for arbitrage due to fluctuations in exchange rates between different countries.
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