Arbitrage Certificate
A document executed by the issuer of tax-exempt
municipal securities at the time of initial issuance certifying as to
various matters relating to the arbitrage rules under federal income tax
laws. A borrower of private activity bond proceeds often also executes an
arbitrage certificate.
REMARKS: In economics and finance, arbitrage is the practice of taking
advantage of a price differential between two or more markets: a combination
of matching deals are struck that capitalize upon the imbalance, the profit
being the difference between the market prices.
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When used by academics, an arbitrage is a
transaction that involves no negative cash flow at any probabilistic or
temporal state and a positive cash flow in at least one state; in simple
terms, a risk-free profit. A person who engages in arbitrage is called an
arbitrageur. The term is mainly applied to trading in financial instruments,
such as bonds, stocks, derivatives, commodities and currencies. |
