It is a process by which the exchange rate between two currencies is kept the same in two different monetary centers. In this process, currency is purchased from a monetary center where it is cheaper and sold in the center where it is expensive in order to make a profit.
There is no arbitrage risk involved in arbitrage trading. Arbitrage opportunity rises due to inefficiencies in the market. In theory, the exchange rate between different currencies should be same in all monetary centers, but sometimes, due to inefficiencies in the market, arbitrage opportunity rises.
