No money or assets change hands at time t = 0. Arbitrage pricing theory (APT) is an alternative to the capital asset pricing model (CAPM) for explaining returns of assets or portfolios.Arbitrage is the simultaneous purchase and sale of the same asset in different markets in order to profit from a difference in its price. The basic intuition that underlies valuation is the absence of arbitrage. The "No arbitrage Argument" is the theory that since the world is cruel, dark and efficient place, you can never get something for nothing. An arbitrage opportunity is a way of making money with no initial investment without any possibility of loss. The basic idea of what no arbitrage means, is that there is no free lunch you cannot get money out of nothing :). Loose Definition of Arbitrage: A trading strategy that earns something from nothing, no matter how the market evolves in the future. Airbnb Rental Arbitrage vs. CoHosting. How can they make a profit in this way?