Arbitrage is the simultaneous purchase and sale of the same or
similar asset in different markets in order to profit from
tiny differences in the asset’s listed price. It
exploits short-lived variations in the price of identical or
similar financial instruments in different markets or in
different forms.
For example :
A stock which is listed on both BSE is trading at
โน100 while the same stock is trading at โน103 on NSE. In this
case an arbitrage opportunity of โน3 is available as you can
buy the stock from BSE at โน100 and sell it for โน103 thus
making โน3 in the transaction.
