Questions tagged [arbitrage]

The simultaneous purchase and sale of a financial security in order to profit from the difference in the security price during the trading activity.

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If arbitrage can happen exactly at one moment, is it really arbitrage?

There are many "interpretations" of what no-arbitrage means in mathematical finance, the most well known is no free lunch with vanishing risk: If $S=\left(S_{t}\right)_{t=0}^{T}$ is a ...
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When looking for arbitrage among a LARGE amount of assets, is there an optimal way?

Looking for arbitrage opportunities when looking at 3 pairs of related currencies is easy. However if we assume that we have a large amount of currencies, is there an optimal way to swipe through them ...
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Self-financing condition and funding, collateral and discounting

I'm reading "Illustrating a problem in the self-financing condition in two 2010-2011 papers on funding, collateral and discounting" paper. Is it just me or authors have a typo in their main ...
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Spot-Futures arbitrage profit calculation

My question is about spot-futures arbitrage. Lets say, t=0 , Spot Price=1.38 , ArbFree Theoretical Fwd Price= 1.40 and Real Futures Market Price = 1.38. So we see that there's arbitrage. I take a long ...
286 views

How to show arbitrage when a European option price is greater than the no-arbitrage price?

My example is: Current price = 20, If it goes up it'll be worth 22, if it goes down it will be worth 18 risk free rate: 12%, time = 3 months Strike = 21 call option is worth 0.633 I know that if the ...
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How to compute the yield to maturity on a zero-coupon 3 year bond in this case?

Suppose I have the following problem: We have data on three bonds: a one-year zero-coupon bond (bond A), a twoyear zero-coupon bond (bond B), and a three-year bond with an annual coupon equal to 5% ...