GMAT Arbitrage

February 12, 2012
Lucas Weingarten

GMAT BlogArbitrage is a glorious thing.  Simply put, arbitrage happens by exploiting differences in price for the same good.  Say the currency exchange market (forex) in Asia is trading the US dollar at 1.5 British pounds per USD (yes, I know it’s actually the other way around these days, but let’s have some fun), while the European market is trading 1.25 British pounds per USD.  I could leave New York, head to Tokyo, and buy a whole bunch of British pounds with my US dollars, say $100 worth.  With my newly minted £150, I could then fly off to London and sell them in exchange for dollars.  Since in London I get $1.00 for every £1.25, then due to the market inefficiency I will receive $120 back, yielding a nice $20 profit on my original investment.   Yay for me!  (And all I had to do was circumnavigate the globe.  Easy peasy.)

Not surprisingly, finding arbitrage opportunities is extremely difficult and exploiting those opportunities is nigh impossible.  For example, in the forex markets, big banks have incredibly powerful computers constantly scanning currency exchanges and will instantaneously capitalize on them for the brief seconds they exist before the markets equalize.  Mere mortals like you and I will never know what it’s like to feel the flush of free money created out of thin air.  Or will we?

Kaplan has created a website dedicated to the New GMAT:  (Actually, one of the videos posted there was the inspiration for this blog entry.]  As you may already know, the GMAT is changing in June 2012 by introducing a new section called Integrated Reasoning.  The current GMAT demands 100-120 hours of diligent prep time if you are looking to achieve a competitive score (e.g., 650+).

After June 5th of this year, GMAT test takers will have a brand new section to prepare for in addition to the AWA, Quant, and Verbal sections current test takers must master.  So how does this present an arbitrage opportunity?  If you prepare for and take the GMAT before June 1st, then you will lock in your GMAT score for five years and never have to even think about IR.  Those that do not lock in their scores will have to devote the 100+ hours of prep time you put in, then spend another 30 hours or more learning about integrated reasoning data sets and the new question types that accompany them.

Think smart.  Act strategically.  Let other folks buy the GMAT for 130+ hours of their time.  Your market is selling it to you for a much cheaper price.  I’ll be drilling down on the five new IR question types in some upcoming posts so come on back for a tall drink of schadenfreude.

Lucas Weingarten Lucas Weingarten is a full-time instructor for Kaplan Test Prep and he loves preparing GRE students for Test Day. The classroom is Lucas’ arena. When he cannot be found in one of Kaplan’s cage matches of learning, he is very likely dancing around DePaul University’s College of Commerce/Kellstadt Graduate School of Business in Chicago professing various courses offered by the Department of Management, up to and including monikers such as: “Managing for Effective and Ethical Organizational Behavior,” “Entrepreneurship Strategy,” “Strategic Managements and Analysis,” “Human Resource Management,” “Recruitment and Selection,” and “Foundations of Business Thought and Theory.” (Although that last one was cancelled just before the quarter started and he’s still not gotten over it.) Lucas spent most of his formative years in North Carolina, but hit the long road as soon as he was able. A world traveler with a currently expired passport, he has lived on and wandered around three continents with the expressed intention of finishing the job. He holds a BFA with a concentration in sculpture as well as an MBA with dual concentrations in Entrepreneurship and Finance. When not challenging standardized tests to a duel or wondering how to corrupt the business students of America, Lucas can be found brewing delicious beers, riding-then-fixing-then-riding his motorcycle, hanging out with dogs, pretending he’s a good cook, and feeling like the luckiest guy in the world to have such a fantastic wife and endlessly amazing young son. He’s in Milwaukee now, but is in Chicago often. Email him anytime about anything at:

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