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Why all apparent arbitrage opportunities cannot be exploited

Explain the reasons why all apparent arbitrage opportunities cannot be exploited.

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Not all apparent arbitrage opportunities can be exploited into practice. If you notice such an opportunity in quoted prices upon a screen opposite you then you are likely to get that while you try to take advantage of them they only evaporate. Here are some reasons for this.

  • Quoted prices are not trade-able and wrong
  • Stock and option prices were not quoted synchronously
  • Here a bid-offer spread you have not accounted for
  • Your model is incorrect, or there is a risk factor that you have not accounted for.

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