Arbitrage proofs in futures market pricing relationships
A)rely on the CAPM.
B)demonstrate how investors can exploit misalignments.
C)incorporate transactions costs.
D)All of the options are correct.

Question

Quizplus · Accepted Answer

Arbitrage proofs in futures market pricing relationships demonstrate how investors can exploit misalignments, meaning that they can take advantage of price discrepancies between futures contracts and the underlying asset to make a profit without taking on any risk. These proofs do not rely on the CAPM (A) or incorporate transactions costs (C), although these factors may be relevant in certain cases.

Arbitrage Proofs in Futures Market Pricing Relationships