Arbitrage is a financial strategy involving the simultaneous purchase and sale of an asset in different markets to exploit price discrepancies.
Traders seek to profit from variations in prices, exchange rates, or interest rates for the same asset.
By capitalizing on these differences, arbitrageurs aim to secure risk-free profits.
The practice is foundational in finance, contributing to market efficiency by aligning prices across markets. However, rapid technological advancements have made arbitrage opportunities less common due to increased market efficiency and reduced price differentials.