Risks related to an individual ﬁrm creates limits to arbitrage.

Name: Risks related to an individual ﬁrm creates limits to arbitrage.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Risks related to an individual firm, such as bankruptcy or default, create limits to arbitrage because investors may be hesitant to take on large positions in a company that carries such risks. This can make it difficult for arbitrageurs to fully exploit pricing discrepancies and can lead to inefficiencies in the market.

Risks Related to an Individual ﬁRm Creates Limits to Arbitrage