Arbitrage is a trading strategy that exploits tiny price differences for the same asset across different markets. An arbitrageur simultaneously buys the undervalued asset in one market and sells it in another where it's overvalued, locking in a risk-free profit. These opportunities are fleeting, often lasting only milliseconds, requiring high-speed execution, frequently via algorithms. While theoretically risk-free, practical challenges like transaction costs, liquidity issues, and market volatility can introduce minimal risk. Arbitrage promotes market efficiency by quickly correcting pricing discrepancies.

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