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The simultaneous buying and selling of a security at two different prices in two different markets, resulting in
profits without risk. Perfectly efficient markets present no arbitrage opportunities. Perfectly efficient markets
seldom exist. However, arbitrage opportunities are often precluded because of transactions costs.
Arbitrage Pricing Theory (APT)
An alternative model to the capital asset pricing model developed by Stephen Ross and based purely on
arbitrage arguments. The A.P.T. implies that there are multiple risk factors that need to be taken into
account when calculating risk adjusted performance or alpha.
Arbitrageur
Often used in risk arbitrage. One who profits from the differences in price when the same, or extremely
similar, security, currency, or commodity is traded on two or more markets. He does so by simultaneously
purchasing and selling these securities to take advantage of pricing differentials (spreads) created by market
conditions. See: risk arbitrage, convertible arbitrage, glossary arbitrage, and international arbitrage.
Are you open
Used in context of general equities. Can a new customer still participate on opposing side of the trade from
that which the first customer initiated?, thus inquiring as to whether or not any portion of that trade is still
available (i.e., If asking customer on buy side, is there stock still available from the block sold by the initial
customer?). See: open.
Arithmetic average (mean) rate of return
Arithmetic mean return.
Arithmetic mean return
An average of the subperiod returns, calculated by summing the subperiod returns and dividing by the
number of subperiods.
ARM
See: Adjustable rate mortgage
Arms glossary
Also known as a trading glossary (TRIN)= (number of advancing issues)/(number of declining issues)(Total up
volume )/(total down volume). An advance/decline market indicator. Less than 1.0 indicates bearish
demand, while above 1.0 is bullish. The glossary often is smoothed with a simple moving average.
Arms length price
The price at which a willing buyer and a willing unrelated seller would freely agree to transact.
Around us
Used in context of general equities. See: away from us.
ARPS
See: Adjustable rate preferred stock
ARPS
See: Auction rate preferred stock
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