Glossary entry
Arbitrage seeks to exploit inconsistent prices for the same asset or economically related claims, typically through offsetting transactions. In theory, perfectly matched simultaneous trades can lock in a difference. In practice, execution timing, financing, fees, transfer restrictions, and imperfect matching create risks that can eliminate an apparent opportunity before it is realized.
Illustrative example
An asset appears cheaper on one venue than another. A proposed buy-and-sell pair only has value after transaction fees, transfer costs, timing, and available quantity are considered.
What to consider
An observed price gap is not guaranteed profit. One side may fail to execute, leaving an exposed position or unexpected funding need.
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