Consider this... All arbitrageurs do not necessarily have the same level of arbitrage-related transaction costs....
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Consider this... All arbitrageurs do not necessarily have the same level of arbitrage-related transaction costs. Different categories of arbitrageurs e.g., index funds, market makers etc. have different levels of transaction costs. Discuss How does this impact the speed and effectiveness with which arbitrageurs eliminate an arbitrage opportunity at different levels of mispricing? How does that impact hedging effectiveness?
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