Arbitrage Arbitrage 1 / 10 What does an arbitrageur typically do when they identify a mispricing in the market? Wait for the price to adjust. Buy low and sell high simultaneously. Hold the asset until the market corrects itself. Invest in options to hedge the risk. 2 / 10 What is a key difference between risk arbitrage and pure arbitrage? Pure arbitrage involves risk, while risk arbitrage does not. Risk arbitrage typically involves mergers and acquisitions, while pure arbitrage does not. Pure arbitrage is speculative, while risk arbitrage is not. Risk arbitrage involves no market risk, while pure arbitrage does. 3 / 10 Which of the following can eliminate arbitrage opportunities? High transaction costs Market inefficiency Sudden market movements Global financial crises 4 / 10 What is triangular arbitrage in currency markets? Buying and selling a currency across three different markets. Exploiting the differences in exchange rates between three currencies. Using three different trading strategies to gain profits in foreign exchange. Holding a position in three different currencies. 5 / 10 Which type of arbitrage involves profiting from price discrepancies between different markets for the same security? Statistical arbitrage Pure arbitrage Risk arbitrage Interest rate arbitrage 6 / 10 In the context of arbitrage, the term “riskless profit” implies: Profits are guaranteed with no possibility of loss. Arbitrage opportunities involve taking on market risk Profits are obtained with minimal risk exposure. Profits are achieved only through careful speculation. 7 / 10 Which of the following is a risk associated with arbitrage? Market liquidity risk Operational risk Price convergence risk All of the above 8 / 10 What condition is necessary for arbitrage to exist? The market is in perfect equilibrium. Prices are different in two or more markets for the same asset. There are no transaction costs. All assets have the same expected return. 9 / 10 Which of the following is an example of pure arbitrage? Buying shares of a company with the expectation of future dividends. Shorting a stock in the belief that it will decrease in value. Buying gold in one market and simultaneously selling it in another market where the price is higher. Purchasing a stock and holding it for long-term capital appreciation. 10 / 10 What is arbitrage? The process of buying a security in one market and selling it in another for a higher price. The process of buying and holding securities for a long time to earn profits. The simultaneous buying and selling of different securities to take advantage of price changes. The practice of buying securities on margin. Your score isThe average score is 0% 0% Restart quiz By WordPress Quiz plugin
