What Is Arbitrage?
Profiting from price differences of the same asset across different markets.
Definition
Arbitrage involves buying an asset where it's cheap and selling where it's expensive, capturing the price difference as profit. In DeFi, arbitrageurs help maintain price consistency across venues.
How It Works
Monitor prices across markets. When a discrepancy appears, buy low and sell high simultaneously. In synthetic markets, this means trading between DEX prices and redemption values.
In Continuum
Continuum tokens trade against the protocol's own pools — a long and a short pool per market, each kept at net asset value by the keeper. Price tracks NAV plus a small spread, so the executable price stays close to the oracle by construction; a large trade can push a pool off the mark for a moment, but it snaps back and big orders fill at the next oracle print. Arbitrage still applies on any external venue where L/S tokens are listed: if an external price diverges from NAV, arbitrageurs mint/redeem against the protocol to capture the gap and pull that venue back toward NAV.
Related Terms
More Trading Terms
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