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Which ones of the following is credited with an important role on the Chicago Mercantile Exchange...

Which ones of the following is credited with an important role on the Chicago Mercantile Exchange because, in the process of realizing profit opportunities, they keep futures rates in line with bank forward rates?

a. speculators    b. hedgers    c. arbitrageurs d. currency traders

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Answer #1

Answer: Option c is correct
Arbitrageurs refers to an investor category who try to make profits from market inefficiencies. For example inefficiencies related to price, dividends etc. Arbitrageurs make continuous trades after discovering price inefficiencies and through the trades they make risk free profits. If the futures rates and bank forward rates are not in line then the prices will be different, the arbitrageurs discover the price inefficiencies and buy the undervalued securities and sell overvalued securities and capture the risk free profits and this brings the future and forward rates in line with each other

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