What Is Arbitrage? Explain Why Arbitrage Drives the Contract Price

question 29

Essay

What is arbitrage? Explain why arbitrage drives the contract price of futures to the price of the underlying asset on the expiration date,for prices above and below the asset price.

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Definitions:

Isotopes

Variants of a particular chemical element which have the same number of protons in their nuclei but differ in the number of neutrons, leading to different atomic masses.

Atomic Number

The number of protons in the nucleus of an atom, which defines the chemical element.

Mass Numbers

The total number of protons and neutrons in the nucleus of an atom, indicating its atomic mass.

Subatomic Particles

Particles smaller than atoms, including protons, neutrons, and electrons, which are the building blocks of atoms.