An Arbitrage Opportunity Is Any Situation in Which

question 18

Multiple Choice

An arbitrage opportunity is any situation in which

• A) Your estimated probability of a stock appreciating in price is three times that of the stock falling in price, and you hold a long position in the stock.
• B) An insider trading on privileged information is able to make supernormal profits.
• C) You are able to generate superior risk-adjusted returns to the market.
• D) You can construct a strategy whose cash flows are non-negative at all times with at least one positive cash flow at one or more points in time.

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Definitions:

Transdermal

A method of delivering medication directly through the skin into the bloodstream.

Cocaine

A powerful stimulant drug derived from the leaves of the coca plant, used medically as a local anesthetic and illicitly for its euphoric effects.

Hippocampus

A major component of the brain located in the temporal lobe, crucial for memory formation and spatial navigation.

Amygdala

A part of the brain involved in emotion regulation, fear responses, and memory, playing a key role in emotional processing.