Which one of the following exploits differences between actual future prices and their theoretically correct parity values?
A) Index arbitrage
B) Marking to market
C) Reversing trades
D) Settlement transactions

Question

Quizplus · Accepted Answer

Index arbitrage exploits differences between actual future prices and their theoretically correct parity values. Marking to market is a daily process of updating the value of a futures contract to reflect the current market price. Reversing trades involve an investor buying and selling the same asset within a short period to take advantage of small price movements. Settlement transactions involve the delivery of the underlying asset upon contract expiration.

Which One of the Following Exploits Differences Between Actual Future