In the Context of This Formula, What Role Does Arbitrage Play in Enforcing the Price Ratio ‘K’?

Arbitrageurs are essential for aligning the pool's internal price ratio with the external market price. The formula x y=k defines the pool's price as the ratio of its assets.

When the external market price diverges, an arbitrage opportunity arises. Traders exploit this by buying the undervalued asset from the pool or selling the overvalued asset to it until the pool's internal price matches the external market price, thus enforcing the correct price ratio within the constant 'k' framework.