Riskless profit and why it anchors pricing

What does arbitrage mean, and why is the assumption that it is absent so central to derivative pricing?

Arbitrage is a strategy that costs nothing (or less than nothing), can never lose, and has a positive chance of profit. Assuming such opportunities cannot persist forces two portfolios with identical future cash flows to have the same price today. That single principle yields put-call parity, forward prices and, with dynamic replication, the Black-Scholes price, without needing investors' risk preferences.