Editing Arbitrage (section)

===Latency arbitrage===
For very short amounts of time, the prices of two assets that are either [[Fungibility|fungible]] or related by a strict pricing relationship may temporarily go out of sync as the [[market makers]] are slow to update the prices. This momentary mispricing creates the opportunity for an arbitrageur to capture the difference between the two prices. For example, the price of [[call option|calls]] and [[put option|puts]] on an underlying should be related by [[put-call parity]]. If these prices are misquoted relative to the put-call parity relationship, it provides an arbitrageur the opportunity to profit from the mispricing.

Latency arbitrage is often mentioned especially in electronic processing in the financial field, where the use of fast server hardware allows an arbitrageur to realize opportunities that may exist for as little as nanoseconds. A study by the [[Financial Conduct Authority]] of the United Kingdom found that this practice generates as much as $5 billion per year in profit.<ref>{{cite web|url=https://www.cnbc.com/2020/01/27/latency-arbitrage-trading-costs-investors-5-billion-a-year-study.html|title=Latency arbitrage trading costs investors $5 billion a year: Study|website=[[CNBC]] |date=27 January 2020 }}</ref>