In economics, arbitrage is the practice of taking advantage of a state of imbalance between two or more markets: a combination of matching deals are struck that exploit the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state. A person who engages in arbitrage is called an arbitrageur. The term is mainly applied to trading in financial instruments, such as bonds, stocks, derivatives and currencies.

If the market prices do not allow for profitable arbitrage, the prices are said to constitute an arbitrage equilibrium. An arbitrage equilibrium is a precondition for a general economic equilibrium.

Statistical arbitrage is an imbalance in expected values. A casino usually has a statistical arbitrage in every game of chance played, even though it could lose money on any single game.

All text is available under the terms of the GNU Free Documentation License (see Copyrights for details).