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An exchange traded fund (ETF)is a security that represents a portfolio of individual stocks.Consider an ETF for which each share represents a portfolio of two shares of International Business Machines (IBM),three shares of Merck (MRK),and three shares of Citigroup Inc.(C).Suppose the current market price of each individual stock are shown below:
-Assume that the ETF is trading for $670.00,what (if any)arbitrage opportunity exists? What (if any)trades would you make?
Chicken
a domesticated bird commonly raised for its meat and eggs; also can denote a game in which two players head towards each other, and the first to veer away is considered the loser.
Payoff
The return or gain received from an investment or decision, representing the benefits accruing to the involved parties.
Pure Strategy Equilibria
In game theory, a situation where each player chooses one strategy and no player can benefit by changing their strategy while the other players keep theirs unchanged.
Swerve
A sudden change in direction or position, often used in strategic contexts to describe a deviation from a previously expected path.
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