Which of the following statements is most correct?
A) The stock index options market was initially inefficient.
B) Arbitrage in the stock index options market is difficult.
C) Since 1983, stock index futures are fairly priced.
D) All of the above.
E) None of the above.

Question

Quizplus · Accepted Answer

All the statements provided are correct in the context of financial markets. Initially, the stock index options market was indeed inefficient as it was a new concept and market participants were still understanding its dynamics. Arbitrage in the stock index options market is difficult due to the complexity and speed required to exploit price differences. Since 1983, with the introduction of models like the Black-Scholes model and improvements in market efficiency, stock index futures have been fairly priced, reflecting all available information.

Which of the Following Statements Is Most Correct