Tick all those statements on arbitrage that are correct (and don't tick those that are incorrect). a. If there is a sporting event with 3 different outcomes which have the odds o, 1, 2, 3 then there is an arbitrage opportunity for a suitable betting strategy. b. The arbitrage theorem essentially tells us that either there exists a risk-neutral distribution or there is an arbitrage opportunity. c. If there is an arbitrage opportunity then this implies that a risk-neutral distribution exists. Od. In real markets there are ocasionally small arbitrage opportunities due to lack of information. Oe. When constructing suitable betting strategies, the number m of outcomes of an event and the number n of possible wagers are always the same.
Tick all those statements on arbitrage that are correct (and don't tick those that are incorrect). a. If there is a sporting event with 3 different outcomes which have the odds o, 1, 2, 3 then there is an arbitrage opportunity for a suitable betting strategy. b. The arbitrage theorem essentially tells us that either there exists a risk-neutral distribution or there is an arbitrage opportunity. c. If there is an arbitrage opportunity then this implies that a risk-neutral distribution exists. Od. In real markets there are ocasionally small arbitrage opportunities due to lack of information. Oe. When constructing suitable betting strategies, the number m of outcomes of an event and the number n of possible wagers are always the same.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Transcribed Image Text:Tick all those statements on arbitrage that are correct (and don't tick those that are incorrect).
O a. If there is a sporting event with 3 different outcomes which have the odds o = 1, 2, 3 then there is an arbitrage
opportunity for a suitable betting strategy.
b. The arbitrage theorem essentially tells us that either there exists a risk-neutral distribution or there is an arbitrage
opportunity.
c.
If there is an arbitrage opportunity then this implies that a risk-neutral distribution exists.
Od.
In real markets there are ocasionally small arbitrage opportunities due to lack of information.
When constructing suitable betting strategies, the number m of outcomes of an event and the number n of possible
wagers are always the same.
De.
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