Arbitrage is the practice of profiting from taking advantage of a price difference between two or more markets or assets, with no cost implication. Examples would include buying a share on one stock exchange and selling it on another for profit; or exploiting currency weakness, such as borrowing cheap currency with low interest rates, such as the yen, convert into a currency with higher interest rates and then buying various securities in that currency - the traders profit from the difference between their high yield investment and the low interest rate on the yen. This is called carry trade.
