In business economics, investment and sports, arbitrage is the practice of taking advantage of a price difference between several markets: striking a variety of matching deals which  take advantage upon the imbalance, the gain being the gap within market prices.

When used by academics, an arbitrage is actually a transaction that concerns no damaging cash flow at any probabilistic or temporal state along with a positive cash flow in a minimum of one state; essentially, it’s the chance of a risk-free profit at zero cost. Essentially free money from deals where no risk existed.
In financial markets this is known as ‘Arbitrage’. In betting markets it is called Matched Betting.

In principle and in academic use, an arbitrage is risk-free; in common use, as in statistical arbitrage, it could make reference to expected profit, though losses may manifest, and in practice, there are always risks in arbitrage, some minor (such as fluctuation of prices decreasing profit margins), some major (for example devaluation of your currency or derivative).

In academic use, an arbitrage involves benefiting from differences in cost of a single asset or identical cash-flows; in common use, it is usually employed to refer to differences between equivalent assets (relative value or convergence trades), such as merger arbitrage.

Individuals that participate in arbitrage are called arbitrageurs say for example a bank or brokerage firm. The word is especially ascribed to trading in financial instruments, like bonds, stocks and shares, derivatives, products and currencies.

Sports arbitrage has also recently become feasible because of the accessibility to web-based bookmakers offering up widely diverging odds on sporting events 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 no risk on the initial stake which cannot be lost.

Arbitrage is just not simply the act of purchasing a physical product in a single market and selling it in another for a larger price at some later time. The deals must take place simultaneously to avoid exposure to market risk, or the risk that prices may change in one market before both deals are completed.

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

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

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