The condition of no arbitrage profits implies that profits cannot be made without taking some risk.

Question

Quizplus · Accepted Answer

No-arbitrage refers to the absence of risk-free profit opportunities in financial markets. If such opportunities existed, savvy investors would take advantage of them until they are eliminated. Therefore, the absence of guaranteed profits means that some level of risk must be taken in order to earn a return.

The Condition of No Arbitrage Profits Implies That Profits Cannot