Why Are Arbitrage Opportunities Short-Lived

question 83

Multiple Choice

Why are arbitrage opportunities short-lived?

• A) Federal regulations will kick in to restrict trade and effectively shut the opportunity down.
• B) Prices will fluctuate up and down as traders take advantage of the opportunity, resulting in the net present value (NPV) fluctuating between positive and negative values.
• C) Once investors take advantage of the opportunity, prices will respond so that the buying and selling price become equal.
• D) Arbitrage opportunities need a lot of information processing, which is very slow to arrive.