Example of Arbitrage
1. For instance, shares of ABC company are listed on the National Stock Exchange (NSE) and New York Stock Exchange (NYSE). The share price on NSE is ₹350 and on NYSE it is listed at $40 per share. Assuming the USD/INR exchange is ₹80 per dollar then the share price of XYZ will be equal to ₹320. Now, the trader practising arbitrage would purchase shares of XYZ at ₹320 on NYSE and sell them at ₹350 on NSE. He will generate a profit of ₹30 per share. This was an example involving the stock exchanges of two different countries.
2. Arbitrage is prominent in the security market but it also happens in daily life. Suppose Mr A purchases 100 tickets of an event in bulk at ₹50 per ticket and then sells them at ₹60. With this, he earns ₹10 on each ticket which gives a total of ₹1000.
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