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I am currently trying to arbitrage across two markets A and B. My trading strategy is as follows: if the price between A and B differs by more than X%, then go long on the lower priced market, and short on the higher priced market, and vice versa.

The assets are otherwise fungible.

Since there is no actual movement of assets across the markets, two questions are prompted:

1. Is this technique still arbitrage?
2. What is this technique called?

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    $\begingroup$ If the asset is truly the same (i.e. it could be bought in one market and delivered in the other, whether you do it or not) then it is arbitrage, if there is some distinction between the two markets (for ex. different "grade" or "fineness" of a commodity, or slightly different maturity for two bonds of same issuer) which prevents this I would call it "convergence trading". $\endgroup$ – Alex C Nov 27 '17 at 4:15
  • $\begingroup$ Relative value ? $\endgroup$ – Lliane Nov 27 '17 at 8:49
  • $\begingroup$ @AlexC I have edited the post to include this. Thanks for the definition! $\endgroup$ – TheGoldenGamer Nov 27 '17 at 15:21
  • $\begingroup$ @Lliane Can you please create an answer so I can accept it? Also, would it still be called relative value if, instead of taking positions, I simply buy/sell the assets directly? $\endgroup$ – TheGoldenGamer Nov 27 '17 at 15:22
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Arbitrage doesn't necessarily require the assets to be fungible or the profit to be realized by netting them against one another. It is a very generic term. People talk about statistical arbitrage which doesn't guarantee a sure gain, or for instance China-Hong Kong AH shares arbitrage where the underlying stock is not even fungible.

What you describe could be called pair trading, relative value or arbitrage, it really depends on the assets you are trading.

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