I am currently taking a course in Financial Mathematics as part of my Maths degree. Many of the covered topics are quite basic, and revolve around potential arbitrage opportunities. For example, consider the following scenario:


Looking at part c) of this question, we deduce that the investor can make a guaranteed profit of $\$ 71.61$, with no risk.

In real market situations, do arbitrage opportunities like this exist, or does the No-Arbitrage Principle always hold?

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    $\begingroup$ In real market situations the players are always looking for opportunities like this (it is a way of thinking that becomes almost an obsession). As a result the opportunities that you can still find are small, and they don't last long. The elimination of Arbitrage Opportunities is an ongoing process, which however never perfectly reach its goal. A professor of mine said: "it is not that there are no free lunches, but that the free lunches quickly get eaten". $\endgroup$ – Alex C May 28 '17 at 13:13
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    $\begingroup$ @AlexC and also, people can have different opinions on what constitutes a free lunch... $\endgroup$ – will May 28 '17 at 13:22

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