header bg


Which of the following is most likely to be an impediment to arbitrage?

A Short-sale restrictions.

Restrictions on short sales may be an impediment to arbitrage when a security is overpriced relative to another security or derivative that has identical cash flows. Because arbitrage transactions are theoretically riskless, risk aversion should not be viewed as an impediment. The law of one price is the theory arbitrage trading will force two assets with the same cash flows toward the same price.