index arbitrage investment & finance definition
The
simultaneous purchase of stock index futures and the sale of some or all of the
component stocks that make up the particular stock index, or the sale of the
index futures and purchase of the stocks. The trading intention is to profit
from sufficiently large intermarket spreads between the futures contract and
the index itself.
See index arbitrage in Wall Street Words
An investment strategy that takes advantage of the price discrepancies between an asset or group of assets and an index futures contract on the asset. For example, a money manager might attempt to earn a profit for shareholders by selling an overpriced stock index futures index and buying the underlying stock. See also
stock-index arbitrage.
Learn more about index arbitrage