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Arbitrage transactions in modern securities markets involve fairly low day-to-day risks, but can face extremely high risk in rare situations, particularly financial crises, and can lead to bankruptcy.
Formally, arbitrage transactions have negative skew – prices can get a small amount closer ( but often no closer than 0 ), while they can get very far apart.
The day-to-day risks are generally small because the transactions involve small differences in price, so an execution failure will generally cause a small loss ( unless the trade is very big or the price moves rapidly ).
The rare case risks are extremely high because these small price differences are converted to large profits via leverage ( borrowed money ), and in the rare event of a large price move, this may yield a large loss.

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