In economics, investment and sports, arbitrage is the practice of taking advantage of a cost difference between 2 or more markets: striking a variety of matching bets that  capitalize upon the imbalances, the profit being the gap within the market prices.

When employed by academics, an arbitrage is a transaction which involves no negative cashflow at any probabilistic or temporal state as well as a positive income in one or more state; in simple terms, it’s the probability of a risk-free gain at zero cost. Essentially free money from deals where no risk existed.
In commercial markets this is known as ‘Arbitrage’. In betting markets it is known as Matched Betting.

In principle and within academic use, an arbitrage is risk-free; in common use, for example statistical arbitrage, it may reference predicted profit, though losses may take place, and in practice, there are always risks in arbitrage, some minor (including fluctuation of prices decreasing income), some major (for example devaluation of the currency or derivative).

In academic use, an arbitrage involves benefiting from variations in price of a single asset or identical cash-flows; in common use, it is also utilized to make reference to differences between very similar assets (relative value or convergence trades), as in merger arbitrage.

Those who participate in arbitrage are called arbitrageurs for example a bank or brokerage firm. The phrase is especially given to trading in financial instruments, for instance bonds, stocks, derivatives, products and currencies.

Sports arbitrage has additionally recently become practical due to the availability of online bookmakers supplying widely diverging odds on sports establishing situations where it’s possible to place bets that cannot lose.

Despite the fact that this involves bookmakers it’s not gambling as there is absolutely no risk on the initial stake which cannot be lost.

Arbitrage isn’t simply the act of buying a product within a market and selling it in another for a better price at some later time. The trades must transpire simultaneously to avoid exposure to market risk, or maybe the risk that prices may change on a single market before both trades are completed.

In functional terms, this can be generally only possible with securities and financial products which can be traded electronically, and even then, when each leg of your trade is performed the prices on the market could have moved.

Missing one of the legs of the trade (and subsequently being forced to trade it soon after at a worse price) is known as ‘execution risk’ or more specifically ‘leg risk’.

“True” arbitrage requires that there be no market risk involved.