The practice of buying and selling equivalent goods in different markets to take advantage of a price difference
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Arbitrage opportunity
Occurs when it is possible to make a profit without taking any risk or making any investment (such opportunities should quickly evaporate in the market)
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NFV/Interest Rate Factor
1+rf
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NPV/Discount Factor
1/1+rf
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Risk Premium
The additional return that investors expect to earn to compensate them for a security's risk
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Principle
The cost of losing a pound in bad times is greater than the benefit of an extra pound in good times
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Negative Risk Premium
If the security's returns vary in the opposite direction of the market index, it offers insurance and will have a negative risk premium
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Other cards in this set
Card 2
Front
Arbitrage opportunity
Back
Occurs when it is possible to make a profit without taking any risk or making any investment (such opportunities should quickly evaporate in the market)
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