CFA Practice Question
According to the no-arbitrage principle, in a well-functioning market an arbitrage profit would result from ______.
A. irrational pricing
B. inflation
C. increased demand
Explanation: An arbitrage profit would result from similar goods having markedly different prices on two different markets. This pricing is irrational. A particular good should have the same price on all markets.
User Contributed Comments 3
| User | Comment |
|---|---|
| Tanou | I don't really understand why pricing could irrational in a well-functioning market... |
| jejasin | Yeah...that is weird. I just memorized that arbitrage happens when prices are mismatched in different markets |
| Inaganti6 | happens in commodity markets in fact that's the only reasons commodity trading firms exist |