The scope of arbitrage is very wide, and buying low and selling high also belongs to arbitrage. There are intertemporal arbitrage, cross-market arbitrage and cross-commodity arbitrage in the futures market. These are all to reduce risks. If you do intertemporal arbitrage, you need to combine it with futures and options. Let's briefly talk about arbitrage in the foreign exchange margin market. Speaking of arbitrage, it is also a way of arbitrage.
Let's talk about arbitrage first. Borrow low-interest currencies such as Japanese yen and exchange them for high-interest currencies such as Australian dollar. You can earn interest. This is the simplest way to make money in the foreign exchange market and the biggest way to make money in the foreign exchange market. This can be concluded from the huge bull market in Australia, Japan, Europe and Japan in the past few years and the huge market triggered by the liquidation of carry trade. The biggest risk of arbitrage comes from exchange rate changes. Some time ago, it was difficult to earn interest in the market. But as long as the situation stabilizes, the carry trade will continue to be staged. Now may be a good opportunity to start a carry trade.
Arbitrage by hedging. Hedging is also used to reduce risk. For example, the United States, Canada and Switzerland can form a hedge when buying and selling. There are risks, but the risks are greatly reduced. In this way, there will be four results. The United States, Canada and Switzerland all rose, the United States, Canada and Switzerland all fell, and the United States, Canada and Switzerland all rose and fell. Including the United States and Canada, or the United States and Switzerland. In these four cases, only when the United States and Canada fall and the United States and Switzerland rise will they suffer big losses. There are two situations that fluctuate little. In one case, the profit is great. Recently, when Meirui minus the United States and Canada reached 500 points, it was an excellent arbitrage opportunity. At that time, buying Meijia Murray could generate a maximum profit of 1500 points. Meirui and the United States and Canada are a good arbitrage combination.
There are also three arbitrators: Miri, Meijia and Gary.
Arbitrage is an investment method independent of unilateral speculation. But there are risks, but there are many ways to reduce risks, and of course, it also reduces some profits. Futures arbitrage: refers to the reverse trading by using the price difference between related markets or related contracts, with a view to profiting from the favorable change of price difference. If the spread between the futures market and the spot market is used for arbitrage, it is called spot arbitrage. If arbitrage is carried out by using the price difference between different contracts in the futures market, it is called spread trading. It is precisely because of the existence of arbitrage in the futures market that it greatly enriches the operation mode of the market and enhances the artistic characteristics of investment transactions in the futures market. When spread trading first appeared, most people in the market regarded it as a kind of speculation. With this kind of trading activity becoming more and more common, its influence is growing. Arbitrage trading is generally regarded as an independent trading method, which plays a specific role and is different from speculative trading. The technology of arbitrage in futures market is very different from that of market makers or ordinary investors. Arbitrators use the price difference between two or more contracts for the same commodity, rather than the price of any contract. So their potential profits are not based on the rise and fall of commodity prices. Instead, it is based on the expansion or contraction of the spread between different contract months, thus forming its arbitrage trading position. It is precisely because the profit of arbitrage trading is not realized by unilateral price rise or fall, so in the futures market, this risk is relatively small and controllable, while its income is relatively stable and rich, which is favored by large households and institutional investors. Judging from the mature trading experience abroad, this method is regarded as a key for large funds to obtain stable returns. It can be believed that after the introduction of stock index futures in China, this kind of arbitrage behavior with relatively small risk will also appear frequently in the market. Generally speaking, interest rates in western countries are different, some countries have high interest rates and some countries have low interest rates. Interest rate is an important function of international capital activities. Without capital control, capital will cross national boundaries and flow from low-interest countries to high-interest countries. International capital flow must first involve international exchange, capital outflow needs to convert local currency into foreign currency, and capital inflow needs to convert foreign currency into local currency. In this way, the exchange rate becomes a function that affects capital flow. Arbitrage means that investors or borrowers use the difference in interest rates and currency exchange rates between the two places at the same time to make capital flows to earn profits. Arbitrage can be divided into arbitrage with and without interest. Non-covered interest arbitrage means that the arbitrageur only uses the difference of interest rates between two different currencies to convert the currency with lower interest rate into the currency with higher interest rate to earn profits. When buying or selling a spot currency, don't sell or buy a forward currency at the same time, and bear the risk of exchange rate changes. In uncovered interest arbitrage transactions, the direction of capital flow is mainly determined by uncompensated spreads. If the interest rate in Britain is Iuk and the interest rate in the United States is Ius, which does not offset the spread UD, then there are: UD = IUK-IUS If luk>lus, UD > 0, capital will flow from the United States to the United Kingdom, and Americans will convert dollars into pounds and deposit them in the United Kingdom or buy British bonds to get more interest. The size of arbitrage profit is determined by the spread between the two and the fluctuation of spot exchange rate. With the spot exchange rate unchanged, the greater the interest rate difference between the two countries, the greater the profit of the arbitrageur. Under the condition that the interest rate difference between the two countries remains unchanged, the higher the interest rate, the greater the profit of the arbitrageur; When the currency with high interest rate depreciates, the profit of the arbitrageur decreases, even to zero or negative. Let's assume that the annual interest rate in Britain is Luk = 10% and that in the United States is LUS = 4%. The spot exchange rate of the pound at the beginning of the year is equal to the spot exchange rate at the end of the year, and the exchange rate of the pound has not changed during 1 year; 1 = 2.80 USD, and the principal of American arbitrageur is 1000 USD. At the beginning of the year, the arbitrageur converted US dollars into British pounds and deposited them in the Bank of England: 1000÷2.80/= 357 1 year, and the interest earned was: 357× 10% = 35.7. If the arbitrageur does not arbitrage and deposits $65,438+0,000 in the Bank of America, he will get interest of $65,438+0,000× 4% = 40, which is the opportunity cost of arbitrage. Therefore, the net profit of the arbitrageur is $60 (100-40). In fact, 1 year, the spot exchange rate of the pound will not stay at the level of $2.8/. If the spot exchange rate of the pound at the end of the year is $2.4/~, due to the devaluation of the pound, 35.7 pounds can only be converted into $85, and the net profit will be reduced from $60 to $45. This shows that when the arbitrageurs bought the spot pound at the beginning of the year, they did not sell the 1 year forward pound at a certain exchange rate, and assumed the risk of exchange rate changes, resulting in a net loss of 15 USD. From this example, it can be seen that the greater the depreciation of the pound, the greater the loss of the arbitrageur. Of course, if the spot exchange rate of the pound at the end of the year is USD 3/~ USD, the arbitrageur will be very lucky, and his net profit will reach USD 67 [($ 35.7× 3) = 40]. The change of carry arbitrage exchange rate will also bring risks to arbitrageurs. In order to avoid this risk, arbitrageurs convert low-interest currencies into high-interest currencies at the spot exchange rate, and also convert high-interest currencies into low-interest currencies at the forward exchange rate, which is called carry arbitrage. Take Britain and America for example. If the interest rate in the United States is lower than that in Britain, Americans are willing to convert dollars into pounds at the spot exchange rate and deposit them in British banks. In this way, the American demand for pounds has increased. The demand for sterling has increased, and the spot exchange rate of sterling should increase if other factors remain unchanged. On the other hand, in order to avoid the risk of exchange rate changes, arbitrageurs all sign contracts to sell forward pounds at the forward exchange rate, which increases the supply of forward pounds. The supply of forward pounds will increase, and the exchange rate of forward pounds will fall when other factors remain unchanged. According to the experience of foreign exchange market, westerners come to the conclusion that the spot exchange rate of currencies in countries with higher interest rates is rising, while the forward exchange rate is falling. According to this law, the direction of capital flow depends not only on the interest rate difference between the two countries, but also on the interest rate difference between the two countries and the forward premium rate or discount rate of the national currency with high interest rate. If the offset spread is CD and the discount rate or premium rate of the pound is F \, then: CD = IUK-IUS 10 F\ If the UK interest rate IUK = 10%, the US interest rate IUS = 4%, the forward pound discount rate F \ =-3%, and CD = 65433. Because arbitrageurs believe that although the forward pound discount reduces their profits, there are still profits to be made. If the discount rate of forward pound is f =-8%, other conditions being the same, CD = 10%-4%-8% =-2% (0, then capital will flow from Britain to the United States. Because arbitrageurs think that the discount rate of forward pound is too high, which not only reduces their profits, but also makes their profits negative. The British, on the other hand, are willing to convert pounds into dollars at the spot exchange rate and dollars into pounds at the forward exchange rate, so that capital can flow from Britain to the United States. Next, give another example to illustrate the actual situation of carry arbitrage. Suppose the principal of the arbitrageur is $65,438+0,000, IUK = 10%, IUS = 4%, the spot exchange rate of the pound is $2.8/%,and the forward exchange rate of the pound is $2.73/%. At the beginning of the year, the arbitrageur converted US dollars into British pounds and deposited them in the British bank: 1000÷2.8 US dollars/= 357 1 year, and the interest earned was: 357× 10% = 35.7 based on the contract signed at that time. This example shows that the arbitrageur sells the spot pound at a higher forward pound exchange rate while buying the spot pound, so as to avoid the losses caused by the sharp drop of the pound exchange rate. After 1 year, the spot pound exchange rate is 2.4 USD/%,and the arbitrageurs still arbitrage at 2.73 USD/%,which not only makes the arbitrageurs profit, but also plays a role in spontaneously regulating the capital flow objectively. The high interest rate in a country means that the capital there is scarce and badly needed. The interest rate in a country is very low. This means that there is enough capital there. Arbitrage activities are motivated by the pursuit of profit, which makes capital flow from rich places to scarce places and makes capital play a more effective role. Through arbitrage activities, capital flows to countries with higher interest rates, where capital increases and interest rates will drop spontaneously; Capital keeps flowing out of countries with low interest rates. If capital decreases, interest rates will increase spontaneously. Arbitrage activities eventually make interest rates in different countries tend to be equal. The imbalance between foreign exchange supply and demand in several important international financial markets provides opportunities for foreign exchange transactions such as hedging, speculation, swaps, arbitrage and arbitrage, which in turn can spontaneously balance the foreign exchange supply and demand in various financial markets around the world. Equilibrium is always relative, and imbalance is absolute and long-term. Therefore, hedging, speculation, swap, arbitrage and arbitrage are essential transactions in the foreign exchange market. Without these transactions, the foreign exchange market will shrink, and it will not play a role in regulating funds or purchasing power. [Edit this paragraph] Overview of Arbitrage Trading Arbitrage trading has become a major trading method in the international financial market. Because of the stable income and relatively small risk, most large funds in the world mainly participate in the futures or options market by arbitrage or partial arbitrage. With the standardized development of China's futures market and the diversification of listed products, the market contains a lot of arbitrage opportunities, and arbitrage trading has become an effective means for some large institutions to participate in the futures market. Arbitrage, also known as hedging profit, refers to foreign exchange transactions in which funds are transferred from countries or regions with lower interest rates to countries or regions with higher interest rates to make investments in order to obtain interest spread gains. It refers to buying and selling two different kinds of futures contracts at the same time. In arbitrage trading, investors are concerned about the mutual price relationship between contracts, not the absolute price level. Investors buy contracts they think are undervalued by the market and sell contracts they think are overvalued by the market. If the price change direction is consistent with the original forecast; That is, the price of the buying contract is higher and the price of the selling contract is lower, so investors can benefit from the change of the relationship between the two contract prices. On the contrary, investors will lose money. The precondition of arbitrage activity is that the arbitrage cost or the discount rate of high-interest currency must be lower than the interest rate difference between the two currencies. Otherwise, the transaction is unprofitable. In the actual foreign exchange business, the interest rate is the interest rate of various currencies in the European money market, mainly based on LIBOR (London Interbank Offered Rate). Because, although all kinds of foreign exchange business and investment activities involve various countries, most of them are concentrated in the European currency market. European money market is an effective way or place for countries to invest.