Securities like stocks are listed across multiple exchanges. Often there is a difference in the price of the security across markets. Arbitrage mutual funds try to take advantage of this difference in pricing. Read this post to understand what these funds are and how they work.
If you have ever invested in the Indian stock market, you may know that there are two major exchanges in India- NSE and BSE. Most popular stocks are listed on both these exchanges. Similarly, within exchanges like Nifty, a particular stock can be purchased/sold at its spot price, or the same can be done with the help of the derivatives market.
Often there is a small difference in the pricing of stocks between exchanges and between the spot price and future price of the stock.Arbitrage funds exploit this difference in pricing to generate returns for investors. Take a look at what these funds are and how they work.