Question

________ occurs when market participants observe returns on a security that are larger than what is justified by the characteristics of that security and take action to quickly eliminate the unexploited profit opportunity. Market intercession Mediation Arbitrage Asset capitalization

Answer 1

Arbitrage

Step-by-step explanation:

Arbitrage is buying and selling an asset concurrently to benefit from a market imbalance.

It is a transaction that gains on various markets or in various forms by leveraging the price differences of identical or similar financial products.

Because of market distortions, arbitration exists and therefore would not happen if all markets were completely effective.