Why Are Arbitrage Opportunities Short-Lived

question 38

Multiple Choice

Why are arbitrage opportunities short-lived?

• A)Arbitrage opportunities need a lot of information processing, which is very slow to arrive.
• B)Financial market regulations will kick in to restrict trade and effectively shut the opportunity down.
• C)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.
• D)Once investors take advantage of the opportunity, prices will respond so that the buying and selling price become equal.

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Definitions:

Serotonin

A neurotransmitter that contributes to feelings of well-being and happiness, along with regulating mood, appetite, and sleep.

Type A Personality

A personality type characterized by competitiveness, impatience, aggressiveness, and a high level of stress.

Hot-Tempered

Characterized by easily provoked anger or a quick temper.

Competitive

Characterized by or displaying a strong desire to be more successful than others.