What is the role of an arbitrageur in foreign exchange?

Question

Quizplus · Accepted Answer

An arbitrageur in foreign exchange aims to make a profit by simultaneously buying large amounts of a currency in one market and selling it in another market, taking advantage of any price discrepancies or inefficiencies in the marketplace. This process is known as arbitrage and is a legitimate way to profit from changes in exchange rates. Buying foreign currency (option A) is a common strategy in foreign exchange, but the key difference is that an arbitrageur is looking to profit from immediate price differences across markets rather than waiting to sell the currency at a later date. Option B is illegal and unethical, while option C is not a role of an arbitrageur.

What Is the Role of an Arbitrageur in Foreign Exchange