By definition, arbitrage simply means the simultaneous purchase and immediate sale of an asset in order to profit from a difference in the price. Arbitrage exists due to market inefficiencies. Given the advancement in technology, it has become extremely difficult to profit from mispricing in the market. Many traders have computerized trading systems set to monitor fluctuations in similar financial instruments. Any inefficient pricing setups are usually acted upon quickly and the opportunity is often eliminated in a matter of seconds. One of the arbitrage opportunities is outward arbitrage. This form of arbitrage involves the rearrangement of a bank to deposit its local currency into foreign banks due to higher interest rates. As a result, the higher interest rate in the interbank market enables the bank to earn more on the interest it receives as to its use of cash. Another arbitrage is triangular arbitrage. This is the process to convert one currency to another, convert it again to a third currency, and then lastly, convert it back to the original currency within a very short time frame. Triangular arbitrage opportunities do not happen very often and when they do, they only last for a matter of seconds. In order for traders to take advantage this type of opportunity, usually requires advanced computer equipments and programs to automate the process. There are all kinds of arbitrage opportunities in the financial markets not just in the currency market. Another example is option arbitrage, to buy a stock at a price given in the option. Since option arbitrage is not an obligation, traders are able to earn small profits with very little or zero risk. Under this circumstance, the arbitrage opportunity results if there is divergence between the value of calls and puts with the same strike price and expiration date. Under adjustments for American options, options adjust for dividends and interest rates. If the dividend increases, the puts expiring after the ex-dividend date will rise in value, while the calls will decrease by a similar amount. Meanwhile, rising interest rates increase call values and decrease put values. Recently, the option arbitrage opportunities have decreased due to the advent of automated trading strategies.   References Options Arbitrage. [Online].Available: http://www.theoptionsguide.com/options-arbitrage.aspx (May 1, 2009). Mike Moffatt. What is Arbitrage? [Online]. Available:http://economics.about.com/cs/finance/a/arbitrage_3.htm (May 1, 2009).