What Is the Difference between an Arbitrageur and a Speculator?
An arbitrageur seeks to profit from temporary price discrepancies of the same asset across different markets or forms, aiming for a risk-free profit by simultaneously buying and selling. A speculator, conversely, takes a position on the future price movement of an asset, inherently taking on market risk in the hope of a larger return.
Arbitrage is stabilizing; speculation is risk-taking.
Glossar
Arbitrageur
Participant ⎊ An arbitrageur is a sophisticated market participant who capitalizes on transient price discrepancies across identical or economically similar assets in different markets.
Speculator
Function ⎊ The speculator actively assumes risk that hedgers seek to offload, providing essential liquidity and price discovery across spot and derivatives venues.
Price Discrepancies
Detection ⎊ Identifying these variances involves continuous, high-frequency comparison of asset prices, implied volatilities, or funding rates across different exchanges or derivative contracts.