3 ms·
1/ both shorting and arbitrage can and will happen as soon as you let people more or less freely buy and sell things 2/ people do it for their own (expected) p
by hcks 3y ago
1/ both shorting and arbitrage can and will happen as soon as you let people more or less freely buy and sell things
2/ people do it for their own (expected) personal profit
3/ at the market level, these transactions contribute to price discovery
You could imagine banning currency arbitrage, but then you’d have to at the same time enforce somehow consistent prices on all markets (I.e. literally do the same thing as arbitragers do)
- pcthrowaway 3y agoIn theory you're making the markets more efficient. Someone outside of finance exchanging one forex for another could get a more fair rate if their exchange is more efficient due to increased liquidity. But by the same token, the other side of that trade is getting a less favourable (but still more "fair") rate