An Index Arbitrage Involves Buying the Cheaper Portfolio and Selling

question 12

Multiple Choice

An index arbitrage involves buying the cheaper portfolio and selling the more expensive portfolio where:

• A) the portfolios try to replicate the performance of two different but related stock indexes
• B) one portfolio consists of an index future while the other portfolio tries to replicate the performance of the underlying index
• C) one portfolio consists of an index option while the other portfolio tries to replicate the performance of the underlying index
• D) one portfolio consists of an index future while the other portfolio consists of an index option,where both derivatives are written on the same underlying index
• E) None of these answers are correct.

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Definitions:

Predicted GPA

An estimated grade point average, often calculated using statistical models that consider various predictors of academic performance.

Slope

In mathematics, the rate at which a line inclines or declines, representing the ratio of the vertical change to the horizontal change.

Intercept

The value where a line crosses the y-axis in a graph.

Predicted GPA

An estimation of a student's grade point average based on variables or predictors such as study habits, high school GPA, and standardized test scores.