Arbitrage is the simultaneous purchase and sale of the same asset in different markets in order to profit from a difference in its price. Capital structure arbitrageurs focus on individual issuers.They look for valuation differentials between a company's debt and equity securities. Arbitrage is when an asset (stocks, currencies, etc.) is bought in one market and sold in another for a higher price. Arbitrage is the strategy of taking advantage of price differences in different markets for the same asset. But the concept as it's being used today is simple enough: to take a position in a debt security to hedge an equity position, or vice versa. 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.