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Basic Question 7 of 7
Which of the following statements about arbitrage transaction is most likely to be correct?
B. It is more likely to occur when the price differential between assets is large and cost of short selling are high
C. It brings the prices to the levels that are consistent with the law of one price.
A. The net inflow of funds occur at the end of the holding period.
B. It is more likely to occur when the price differential between assets is large and cost of short selling are high
C. It brings the prices to the levels that are consistent with the law of one price.
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I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach
Learning Outcome Statements
explain how the concepts of arbitrage and replication are used in pricing derivatives
CFA® 2025 Level I Curriculum, Volume 5, Module 4.