如题

问题如下：

Meredith Alvarez is a junior fixed-income analyst with Canzim Asset Management. Her supervisor, Stephanie Hartson, asks Alvarez to review the asset price and payoff data shown in Exhibit 1 to determine whether an arbitrage opportunity exists.

Exhibit 1. Price and Payoffs for Two Risk-Free Assets

Based on Exhibit 1, Alvarez finds that an arbitrage opportunity is:

选项：

A.

not available.

B.

available based on the dominance principle.

C.

available based on the value additivity principle.

解释：

Correct Answer: B

B is correct. Based on the dominance principle, an arbitrage opportunity exists. The dominance principle asserts that a financial asset with a risk-free payoff in the future must have a positive price today. Because Asset A and Asset B are both risk-free assets, they should have the same discount rate. Relative to its payoff, Asset A is priced at $500/525, or 0.95238, and Asset B is priced at $1,000/1,100, or 0.90909. Given its higher implied discount rate(10%) and lower corresponding price, Asset B is cheap relative to Asset A, which has a lower implied discount rate (5%) and higher corresponding price.

The arbitrage opportunity based on dominance is to sell two units of Asset A for $1,000 and buy one unit of Asset B. There is no cash outlay today, and in one year, the portfolio delivers a net cash inflow of $50 [= $1,100 – (2 ×$525)].