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I'm trying to understand your question. To be concrete --- and trying to really putting your question in solid terms --- suppose for simplicity we are dealing with something like a standard geometric Brownian motion, $$ dS_t = \mu S_t dt + \Sigma S_t dW_t $$ where $S = (S_{1}, ..., S_{n})$ represent stock price of the $n$ risky assets at time, and $W = ...


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Conventional wisdom would have it that the system would be arbitrage free if and only if: All the implied spot and forward rates on each curve are non-negative (I.e implied discount factors are monotonic non-increasing wrt maturity) All the implied spot and forward rates on the 3M curve are greater than or equal to the corresponding rates on the OIS ...


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Philosphically, I agree with you. Sometimes you will see people like Icahn, Kohlberg Kravis... buy a majority stake in a company and take it private, selling off parts of the company, restructuring others. One interpretation of this activity is exactly what you said: there is a mispricing in the stock (compared to assets, earnings, whatever), but no way to ...


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Existence of arbitrage opportunities does not lead to market as inefficient. Samuelson has defined relationship between existence of arbitrage opportunities and market efficiency. He said, if market adjust quickly to arbitrage opportunities to return back to normal without cost of any other investor and through market mechanism then market can be said ...


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It seems reasonable that no-arbitrage doesn't necessarily imply EMH. If we are talking pure arbitrage opportunities, like offsetting the same contract on 2 exchanges, futures cash and carry, BS options no-arbitrage, etc. Mainly, for derivative products it's very easy to do the arbitrage trade. However, this means that you are assuming the underlying product ...


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Just take a look at the bid ask spreads plus transaction costs. It's nonsense what you are saying because on one side you implicitly assume enough liquidity so you market maker executes the Delta of your position. On the other hand you assume the market is liquid so you can move the market when you sell your position.



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