Finalnub

an arbitrager finds identical cash flow streams (bond, security, physical goods), and if the market pricing of these identical cash flow is different. an arbitrage would take a profit from that until the price and PV reach equilibrium

for example, a 10- year bond that pays with 10% coupon is priced at 100 dollars. at the same time, a prefer share that pays 10 dollars in dividend annually is priced at 99 dollars. an arbitrager would buy the preferred share and issue a 10 year bond at the same time, and the profit from that would be 1 dollar difference between the price of the bond and the preferred share that would give the same cash flow over 10 years.