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As explained by the Harvard Business School, Arbitrage is an investment strategy in which an investor simultaneously buys and sells the same asset in different markets to take advantage of a price anomaly to generate profit.
While price differences are typically small and short-lived, the returns can be impressive when multiplied by large volume. Arbitrage is commonly leveraged by hedge funds and other sophisticated investors.
There are several types of arbitrage, including pure arbitrage, merger arbitrage, and convertible arbitrage.
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