Differentiate "arbitration" and "speculation" in foreign exchange market
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Arbitration is simultaneous purchase and sale of foreignexchangesin two or more markets to proFt from discrepancies inquotations whereas A speculation in the ±orexmarket means that you buy and sell currencies
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difference between Arbitrage and Speculation--
• The aim of both arbitrage and speculation is to make some form of profit even though the techniques used are quite different to each other.
• Arbitrage traders take lower levels of risk, and benefit from the natural market inconsistencies by buying at a lower price from one market and selling at a higher price at another market.
• Speculation is done by trading instruments such as stocks, bonds, currency, commodities, and derivatives, and a speculator looks to make a profit through the rising and falling of the prices in these assets.
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