Quantum physicist and Nobel laureate Niels Bohr once said, essentially, that the opposite of a true statement is obviously false, but the opposite of a profound truth is another profound truth. The existence of arbitrage opportunities is a profound truth. Arbitrage is simultaneously both impossible and prevalent. Bohr argued that only in allowing and confronting the paradox head-on can we grow in our understanding.
“How wonderful that we have met with a paradox. Now we have some hope of making progress.” Niels Bohr
How can arbitrage be both impossible and prevalent? We have met with a paradox, but where is our progress? There is an answer. The answer is frictions.
The resolution of the paradox is this: yes, there are arbitrage opportunities, but not every person can exploit every arbitrage opportunity. Some are made just for you, some just for others, and some for whoever can find them.