Violation of the spot-futures parity relationship results in ________.
A) fines and other penalties imposed by the SEC
B) arbitrage opportunities for investors who spot them
C) suspension of delivery privileges
D) suspension of trading

Question

Quizplus · Accepted Answer

Violation of the spot-futures parity relationship creates an opportunity for investors to earn profits through arbitrage. They can buy the asset in the spot market and sell it in the futures market (or vice versa) to take advantage of the price differences. Therefore, option B is the correct answer. The other options are not applicable or too severe for this violation.

Violation of the Spot-Futures Parity Relationship Results in ________