What Role Do Derivatives Play in Cross-Market Arbitrage Strategies?

Derivatives, like futures and options, allow arbitrageurs to create synthetic positions or exploit mispricing between the derivative and the underlying asset. A common strategy is cash-and-carry arbitrage, exploiting the futures-spot price basis.

They enable risk-hedging across different markets or exchanges. Derivatives facilitate simultaneous buy and sell actions, locking in profit.

This links different market segments and promotes efficiency.