If a Stock Index Futures Is at 455 and the Pricing

question 11

True/False

If a stock index futures is at 455 and the pricing model says it should be at 458,an arbitrageur should buy the futures and sell short the stock.

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Definitions:

Nonsystematic Risk

The part of an investment's risk that is attributable to firm-specific or industry-specific factors and can be mitigated through diversification.

Volatility

A statistical measure of the dispersion of returns for a given security or market index, often used to quantify the risk of the security or market.

Sensitivity

The degree to which a financial asset's price responds to changes in underlying factors, such as interest rates or market volatility.

Systematic

Refers to the risk inherent to the entire market or market segment, which cannot be eliminated through diversification.