Insuring absence of an arbitrage opportunity

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• Pricing in absence of an arbitrage opportunity

  Assuming that there is a competitive market for McDonalds food items, at what price must a Big Mac value meal sell to insure the absence of an arbitrage opportunity and uphold the law of one price 1. $4.08 2. $4.38 3. $5.47 4. $5.77

• forward exchange market

  If the returns are different, an arbitrage transaction could, in theory, produce a risk-free return.

• Furtures market equilibrium

  If there is a difference between what traders believe that future price will be and what the futures contracts are selling for, it creates an arbitrage opportunity. If the futures price is too high traders will short the futures contracts.

• Interest rate: principle of comparative advantage

  What is an Interest (2004) provides that absence of barriers lead to a situation where arbitrage eliminates comparative advantage that is present within markets thus eliminating swap transactions. References Bhole, L.M. & Mahakud, J. (2009).

• Finding Arbitrage Opportunity

  This is no longer an arbitrage because the definition of an arbitrage is that the investor can never lose money. So the only time when the arbitrage opportunity is elimated is when the price of the stock and the option add up to more than $18.52.

• Triangle Exchange Opportunity- Foreign Currency Exchange

  b) Calculate the arbitrage profit assuming an initial investment amount of ZAR 1 million?

• Arbitrage Profits for Two Banks

  If we assume no transaction costs, there is an opportunity for arbitrage. If an arbitrageur has US $20,000 how can she make profit and how much can she make?

• Exchange Rates-Arbitrage profits

  c) if there is a 1% transaction cost for transactions, is there still an opportunity for arbitrage?

• International Arbitrage Opportunities

  This answer provides you an excellent discussion on international arbitrage opportunities