What is meant by the term "arbitrage"?

Arbitrage is a term used in economics that means taking advantage of differences in price of a single item. The author references a padre who would purchase items sold for lesser amounts within one group of POWs and then re-sell it for a greater profit within another group of POWs. For example, buying coffee from the British at a small number of cigarettes and then selling it to the Russian prisoners for a much larger number of cigarettes. Generally, arbitrage should involve zero risk, because the two transactions should occur simultaneously, but this was not an option in the POW camps. According to Aswath Damodoran in Corporate Finance Theory and Practice, this form of arbitrage is classified as near arbitrage. Pure arbitrage requires that you invest no money, take no risk and walk away with sure profits. Unless the transactions can be completed...
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