Tuesday, April 4th, 2017

Investment Stats Question- I need some serious brainpower?

If we assume the SP 500 index x have the volatility, it is conceivable that the SP 100 should always have greater volatility, (I’m assuming that the effect of correlations and the weights of the assets would be similar in both indexes, but I realize they are not the same) — Should not be possible to create an arbitrage trading strategy in which he could always sell the possibly greater volatility index (SP 100) and use the proceeds to buy the less volatile (SP 500)? The indices are almost identical and the addresses, but could not compensate for a large enough position to capture the inherent value of the difference in volatility – particularly in an index option with a very low risk? Please make holes in my mind (preferably a Phd Finance or Stats). This is not by the indexes mansos.He move in similar directions, but the compensation – I refer to the profitability of each position and we are selling and buying side to side.

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