ABSTRACT
This chapter offers a definition of institution, and shows how institutions affect the implementation of arbitrage in the context of arbitrage transactions and creating conditions for arbitrage. It describes different types of transaction and institutional costs as well as transformation costs of arbitrage. The chapter also shows that arbitrage has become the dominant practices in business operations and has evolved from a technical element to the dominant strategy. The concept of the institution in modern literature seems quite blurred in that, in general, it reflects the diversity of the academic community's views about its definition. One can see the continuous evolution of the term institution', which changes constantly depending on the position of the authors, varying from the scale of a social system to routine individual action. An institution is considered as a system of relatively stable traits and outwardly manifested characteristics of an organisation, as well as judgments about it by other organisations or people.
