What Is the Difference between an Arbitrage Opportunity and a Liquidation Opportunity in DeFi?

Arbitrage is exploiting a temporary price discrepancy between two or more markets to make a risk-free profit, often by buying low and selling high simultaneously. Liquidation is the forced closure of an undercollateralized loan position, where the liquidator pays off the debt and claims the collateral, often at a discount, to maintain the solvency of the lending protocol.