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 above.
E)none of the above.

Question

Quizplus · Accepted Answer

Arbitrage proofs demonstrate how investors can exploit pricing misalignments in futures markets. This involves identifying discrepancies between the futures price and the underlying asset price, and taking advantage of the difference through buying or selling futures contracts to capture a profit. The proof does not necessarily rely on the CAPM or incorporate transaction costs, although investors may consider these factors when implementing their strategy.

Arbitrage Proofs in Futures Market Pricing Relationships