Glossary · from the DESK dictionary
Arbitrage
Simultaneously buying and selling the same (or an economically equivalent) asset in different markets to profit from price differences.
In plain words
If the same thing costs different amounts in two places, you can theoretically profit risk-free by buying cheap and selling dear.
In more detail
Pure arbitrage is considered risk-free and is typically competed away within milliseconds in liquid markets by high-frequency trading (see triangular arbitrage).
What it means for traders
A foundational concept in finance theory — the no-arbitrage assumption underlies virtually every pricing model.
Common pitfalls
Rarely truly risk-free in practice — transaction costs, timing, and liquidity can eat into arbitrage profits.
Related terms
Arbitrage Profit · Arbitrageur · Fixed Income Arbitrage · Index Arbitrage · Kimchi Premium · Law of One Price · Put-Call Parity · Triangular Arbitrage
From the DESK dictionary. For information only, not investment advice.
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DESK is a research tool and not investment advice. Page generated: 2026-10-12.