- simultaneous purchase and sale of an asset across different markets to profit from price differences
- core mechanism driving market efficiency: arbitrageurs close price gaps, aligning values across venues
- risk-free arbitrage: guaranteed profit from mispricing, theoretically eliminated instantly in efficient markets
- statistical arbitrage: probabilistic exploitation of historical price relationships
- triangular arbitrage: exploiting inconsistencies among three currency pairs
- in DeFi: cross-chain and cross-pool arbitrage bots maintain price consistency across AMM liquidity pools
- arbitrage connects fragmented markets into a unified price discovery system
- transaction costs, latency, and gas fees set the lower bound for exploitable price differences