A brief guide to the concept of arbitrage in financial markets.
Arbitrage is the practice of taking advantage of price differences in different markets for the same asset. It involves buying low in one market and selling high in another, resulting in a risk-free profit. The key to successful arbitrage lies in identifying these discrepancies and executing trades swiftly to capitalize on them before prices adjust. As markets become more efficient, finding profitable arbitrage opportunities can become increasingly challenging, requiring advanced analytical skills and quick decision-making.
In a world of perfect markets, arbitrage plays a crucial role in ensuring prices reflect true value.
