If You Determine That the DAX-30 Index Futures Is Underpriced

question 11

Multiple Choice

If you determine that the DAX-30 Index futures is underpriced relative to the spot DAX-30 Index you could make an arbitrage profit by

• A)buying all the stocks in the DAX-30 and selling put options on the DAX-30 Index.
• B)selling short all the stocks in the DAX-30 and buying DAX-30 futures.
• C)selling all the stocks in the DAX-30 and buying call options on the DAX-30 Index.
• D)buying DAX-30 Index futures and selling all the stocks in the DAX-30.
• E)None of the options

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Definitions:

Simultaneous Game

A situation in game theory where all players make their decisions or moves at the same time without knowledge of the others' choices.

Shoplifter

A person who steals goods from a store while pretending to be a customer.

Nash Equilibrium

A concept in game theory where no player can benefit by changing their strategy while the other players keep theirs unchanged, leading to a situation of mutual best response.

Simultaneous Game

A game theory model where players make decisions or choose strategies at the same time, without knowledge of the others' choices.