Discount Arbitrage definition

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Discount Arbitrage

Discount Arbitrage logo #21012A riskless arbitrage in which a discount option is purchased and an opposite position is taken in the underlying security. The arbitrageur may either buy a call at a discount and simultaneously sell the underlying security (basic call arbitrage) or may buy a put at a discount and simultaneously buy the underlying security (basic put arbitrage). See...
Found on http://www.duke.edu/~charvey/Classes/wpg/bfglosd.htm
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