At first the arbitrage activities of the Salomon group had focused exclusively on the United States. But as other countries also began to deregulate their financial systems, arbitrage opportunities began to appear in capital markets overseas. Japan, for example, partially liberalized its financial system in the 1980s, and Salomon became heavily involved in arbitrage involving convertible bonds. (A convertible bond is one that includes an option to exchange it for another asset, in most cases for stock of the corporation that has issued it. Often such bonds trade at prices different from those implied by the value of the option as calculated by Black-Scholes or other models of option pricing.) The bank made almost $1 billion in two years of arbitrage trading of this kind in Japan (Meriwether interview).

Donald MacKenzie, An Engine, Not a Camera, loc. 967