You Believe That the Spread Between the September S&P 500

question 3

Multiple Choice

You believe that the spread between the September S&P 500 future and S&P 500 index is too large and will soon correct.This is an example of ______________.

• A) pairs trading
• B) convergence play
• C) statistical arbitrage
• D) long/short equity hedge

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Definitions:

Normal Distribution

A bell-shaped curve that represents the distribution of many types of data where most values cluster around a central mean.

X-axis

The horizontal axis in a coordinate system, typically used to represent the independent variable in a graph.

Median

The middle value in a sorted list of numbers, effectively dividing the dataset into two halves.

Normally Distributed

Describes a probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence.