If the price of a U.S. Treasury security is higher
If the price of a U.S. Treasury security is higher than its arbitrage-free value, an arbitrage profit can be generated by:
A. buying the U.S Treasury security, stripping it and selling the strips.
B. shorting the U.S. Treasury security and calling it from the issuer.
C. shorting the U.S. Treasury security and reconstructing it from strips.
参考解答
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2024-11-17 14:03:12
Ans:C
C is correct because strips can be purchased to create a synthetic U.S. Treasury security to cover the short at a price lower than the price at which the U.S Treasury security was shorted, generating an arbitrage profit.
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