Explore commonly used personal finance terms.
An arbitrage opportunity arises when there is a price discrepancy for the same asset across different markets, allowing traders to buy low in one market and sell high in another. This price difference creates a potential for risk-free profit, though true arbitrage opportunities are rare and often quickly corrected by the market. Arbitrage is widely used in financial markets, particularly in foreign exchange, commodities, and stock markets, helping maintain market efficiency by aligning prices across different exchanges.
