In
economics and
finance,
arbitrage (, , ) is the practice of taking advantage of a price difference between two or more
markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the
market prices. When used by academics, an arbitrage is a transaction that involves no negative
cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs. For instance, an arbitrage is present when there is the opportunity to instantaneously buy low and sell high.