How Does an Arbitrageur Profit from a Price Discrepancy in a Liquidity Pool?

An arbitrageur profits by simultaneously buying the underpriced asset in the liquidity pool and selling it on an external exchange where it is overpriced, or vice-versa. This action is repeated until the pool's price, determined by the ratio of tokens, aligns with the external market price.

The difference between the buy and sell price, minus transaction costs, is the arbitrage profit.