Arbitrage is __________________________.
A) is an example of the law of one price
B) the creation of riskless profits made possible by relative mispricing among securities
C) is a common opportunity in modern markets
D) an example of a risky trading strategy based on market forecasting

Question

Quizplus · Accepted Answer

Arbitrage is the creation of riskless profits made possible by relative mispricing among securities, meaning you can buy an asset in one market and sell it simultaneously in another market at a higher price, making a profit without taking any market risk. It is not an example of the law of one price, which states that identical goods should have the same price in different markets, nor is it a common opportunity in modern markets. It is also not a risky trading strategy based on market forecasting.

Arbitrage Is __________________________