Asked by
Clinton Collins
on Oct 20, 2024
Verified
Arbitrage is ________.
A) an example of the law of one price
B) the creation of riskless profits made possible by relative mispricing among securities
C) a common opportunity in modern markets
D) an example of a risky trading strategy based on market forecasting
Arbitrage
The practice of buying and selling the same asset in different markets to profit from price discrepancies.
Law Of One Price
An economic theory that suggests the price of identical goods in different markets must be the same after exchange rate adjustments.
Mispricing
An occurrence in financial markets where the price of an asset does not reflect its true value, due to various factors like misinformation or market inefficiency.
- Understand the principle of arbitrage and its function within financial markets.
Verified Answer
SR
Learning Objectives
- Understand the principle of arbitrage and its function within financial markets.