Schweser had a question about an investment firm that guaranteed a return on a riskless arbitrage trade, which the vignette stated was only possible by them since the firm is the largest in the world and has the lowest transaction costs. I said it was unethical, since you should never guarantee a return, ever. I saw it as events can always occur which might impaire the planned riskless returns. The answer disagreed and said since it was truly riskless due to their sizen and blah blah, no ethical violation. I know Schweser gets things wrong from time to time, is this one of those occasions?
I don’t think you never guarantee returns. Somewhere I read, if you have invested in a T bond which pays 5%, then you can guarantee the return. I might be wrong though
Yeah you can guarantee returns if it’s backed by an investment grade Government Bond. There’s a reason we use it as the “risk-free” rate.
Found it, standard I© Misrepresentation. The wording specifically mentions risky assets. No risk no problem. Thanks guys
Not true - if it is pure arbitrage related, then you are fine