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. Arbitrage is a strategy that investors use while trading where they purchase an asset in one market and sell the same in a different market or stock exchange.Technically, arbitrage refers to a profitable trading opportunity which carries no risk. The locational arbitrage means when the currency exchange rate differs from location to location. Arbitrage is the art and science of studying trading opportunities in great detail to the point of obsession where you are looking for a Gap. This type of strategy involves a large position in a security that is traded in two different markets at different prices. In the world of finance, arbitrage is the practice of taking advantage of a state of imbalance between two or more markets. Isolated, the term arbitrage has a financial connotation, and it means "to buy and sell. " The term heavily relies on the theory of efficiency. Arbitrageurs, traders who engage in arbitrage, buy in one market, whilst simultaneously selling an equivalent size in a different but related market.