Arbitraging. Dealing

in two markets to profit by the difference in prices. In stocks an arbitrage busine may be conducted between New York and London or between New York and Boston or - between New York and any other market. Grain, cotton, etc., are dealt in under the same conditions. For additional information see Arbitrage.: Arbitration of exchange. A calculation based on rates of exchange to determine the difference in money values at three or more places; or, a calculation based on the money values at three or more places to determine the ratio of exchange between the different places. Where three places are concerned the calculation is called simple arbitration; where more than three places are concerned the calculation is called compound arbitration. As an operation (as distinguished from a calculation) arbitration of exchange consists in dealing for profit in exchange between three or more places. The profit is derived from the difference in the rates of exchange on the several places. As an example of simple arbitration of exchange a banker in New York sells a bill of exchange on London and covers it. (pays it) by forwarding to London a bill on Paris for an equivalent amount purchased by him (the banker) at a lower price. Or, the banker in New York buys a bill on London and sells against it a bill on Paris, which latter bill (the bill on Paris) he covers by forwarding to Paris in payment of it the + bill on London. Simple arbitration of exchange is a triangular operation in exchange. As an example of compound arbitration of exchange a banker in New York sells a bill on London, buys a bill on Berlin and with the bill on Berlin buys in Paris a bill on London to cover (pay) the bill on London sold by him (the banker). Or, the banker in New York buys a bill on London, sells a bill on Berlin and with the bill on London buys in Paris a bill on Berlin to cover (pay) the bill on Berlin sold by him (the banker). When four points are involved the term quadrangular operation applies. 31