Arbitrage is the market activity of buying and selling of same security on exchanges orbetween spot prices of a security and its future contract.
Arbitrage is the profit making market activity of buying and selling of samesecurity on different exchanges or between spot prices of a security and its futurecontract. Here exchange refers to the stock market where shares are traded, like theNSE and BSE.
A stock is traded in multiple stock exchanges and on each stock exchange
the quoting price may be a bit different. Hence arbitrage as a practice is followed totake advantage of the price disparity. Originally arbitrage occurred in the currencymarket, but now it applies equally in the commodity, futures and the stock market aswell.
Infosys is quoting at Rs 2750 on the BSE and Rs 2760 on the NSE. Hence
one can sell the stock on the NSE and buy from the BSE at the same time. This trade
will lead to a profit without any risk. This process is arbitrage.