why is arbitrage important 
in the course of making a profit arbitrage traders enhance the efficiency of the financial markets as they buy and sell the price differences between identical or similar assets narrow the lower priced assets are bid up while the higher priced assets are sold off in this manner arbitrage resolves inefficiencies in the market s pricing and adds liquidity to the market the bottom linearbitrage is a condition where you can simultaneously buy and sell the same or similar product or asset at different prices resulting in a risk free profit economic theory states that arbitrage should not be able to occur because if markets are efficient there would be no such opportunities to profit however in reality markets can be inefficient and arbitrage can happen when arbitrageurs identify and then correct such mispricings by buying them low and selling them high though they work to move prices back in line with market efficiency this means that any arbitrage opportunities that do occur are short lived there are many different arbitrage strategies that exist some involving complex interrelationships between different assets or securities correction april 9 2022 a previous version of this article had miscalculated the complicated arbitrage example 