The simultaneous purchase and sale of a financial security in order to profit from the difference in the security price during the trading activity.
It is a particular trade methodology that allow investors to make profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms.
The existence of the possibility to make an arbitrage in finance is a proof of the existence of market inefficiencies, as suggested by the academic literature.
It also provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time.
