Question
In: Finance
describe and investment scenario in which arbitrage exists. in describing your example clearly explain what is meant by the term arbitrage.
Financial Math
describe and investment scenario in which arbitrage exists. in describing your example clearly explain what is meant by the term arbitrage.
Solutions
Expert Solution
Arbitraging means an opportunity for the investor in which he can buy the similar securities on two different Markets and make a rate of return so it is reflecting that there are various markets on which similar securities are traded and there is a price discrepancy between the securities so arbitrageurs are always trying to capitalise upon that price discrimination between two different markets for the similar security.
Arbitraging will be existing in those scenarios when there will be different prices upon two different stock exchanges for the similar stocks or it will also existing when there will be two different prices for similar securities in two different markets at the exact point of time.
Like, if Reliance is trading on National Stock Exchange on 1100 and Reliance trading on Bombay Stock Exchange on 1110, so, arbitrageurs will be trying to exploit the gap of 10 rupees.
Arabitraging is a violation of Efficient market hypothesis and it is reflecting that there are incorrect pricing on different exchanges for similar stocks.
jeff jeffy answered 2 years agoRelated Solutions
Explain what is meant by the term Arbitrage and why the idea of markets being arbitrage...
Explain in your own words what is meant by the phrase “arbitrage in financial markets”. Specify...
Explain what is meant by the term perceived risk. Provide an example for each of the...
What is meant by the term sustainability and explain its 3 aspects? Include an example illustrating your comments.
explain what is meant by Hollywood Accounting, and why it exists
Explain what is meant by the term ‘linked genes’ with respect to homologous recombination. For example,...
Explain, in your own words, what the Arbitrage Principle is and provide an example when it...
In JAVA, Describe a scenario in which you would use a four-dimensional array. Clearly explain the...
. Explain in your own words what is meant by the term ‘price elasticity of demand’....
Describe what is meant by the term “greenhouse effect”. Indicate which species make the greatest contribution...
- Consider a buffer system consisting of Benzoic acid (pKa = 4.20) and sodium benzoate, a) Would...
- Decision Variables S T Minimize 1.8S + 2.20T Subject to: Potassium 5S + 8T >= 200...
- A neurologist needs to counsel a stroke victim and her husband about possible outcomes, treatment options,...
- Case Study: Personal Beliefs in the Workplace Don Shakow was a prominent professional who worked in...
- 1: Competency framework usage is the modern best practice in management. What is meant by competency...
- A 19.34 g mixture of sugar (C12H22O11) and table salt (NaCl) is dissolved in 231 g...
- Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to...