ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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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. If there is an arbitrage opportunity then this implies that a risk-neutral distribution exists.
C. When constructing suitable betting strategies, the number m of outcomes of an event and the number
n of possible wagers are always the same.
d. In real markets there are ocasionally small arbitrage opportunities due to lack of information.
e. The arbitrage theorem essentially tells us that either there exists a risk-neutral distribution or there is an
arbitrage opportunity.
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Transcribed Image Text: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. If there is an arbitrage opportunity then this implies that a risk-neutral distribution exists. C. When constructing suitable betting strategies, the number m of outcomes of an event and the number n of possible wagers are always the same. d. In real markets there are ocasionally small arbitrage opportunities due to lack of information. e. The arbitrage theorem essentially tells us that either there exists a risk-neutral distribution or there is an arbitrage opportunity.
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