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:

Probability

The measure of the likelihood that an event will occur.

Expected Value

The predicted average outcome of a probabilistic event, accounting for all possible outcomes and their probabilities.

Stock Price

The value of a single share of a company's stock, determined by the balance of buying and selling activity in the stock market.

Probability

The measure of the likelihood that an event will occur, quantified between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.