Arbitrage

Arbitrage is the practice of simultaneously buying and selling related securities to profit from a temporary price discrepancy, with little or no net risk if executed correctly. Classic arbitrage exploits the same asset trading at two different prices in two different places at the same instant.

Pure, risk-free arbitrage is rare and fleeting in modern markets, since high-speed trading firms compete to close any gap within fractions of a second. Most strategies called "arbitrage" today, like merger arbitrage (betting on the spread between a target's price and the announced acquisition price), carry real residual risk despite the name.