Financial Risk Manager Part 1

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Which of the following statements is correct regarding stock index arbitrage?

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A

It involves purchasing one stock index futures contract and selling a different stock index futures contract.

B

It involves purchasing a basket of stocks that are members of an index while selling other stocks in the same index.

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C

It ensures that the price of the index will always correspond to the value of a portfolio of the underlying stocks, even if the portfolio is not tradable.

D

It involves selling a stock index futures contract and purchasing the portfolio of stocks underlying the index.

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