2nd type of arbitrage

According to the 2nd type of arbitrage, there is an arbitrage oppourtunity if the portfolio of A and B yields more than the risk free rate but what if the portfolio yield is less than the risk free rate, will there be a chance for an arbitrage?

just think of the risk free rate as portfolio C that yields X. When portfolio C yields more, you buy it and short the portfolio that yields less (in this example C is riskless, so that’s as far as you need to go in the analysis)

In simple words, buy low sell high. This also means the portfolio is overpriced since it cannot even earn more than risk-free bond.

Remeber that pure arbitrage means a profit without investment and risk so:

if a portfolio yields more than risk free rate then borrow at the risk free rate and invest in the portfolio;

in the opposite setting sell short the portfolio and invest the proceeds at the risk free interest rate.