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Undervalued security and short-selling

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You are a professional investor who manages the investments on behalf of your wealthy clients. You have identified an attractive arbitrage opportunity between a pair of dual-listed shares, Royal Dutch and Shell. You are about to make a large investment (relative to the overall size of your portfolio) in the two stocks. This trade involves buying the relatively undervalued security and short-selling the relatively overvalued security. In this case,...

A. Systematic risk is mostly irrelevant

B. Systematic risk is typically very important

Reference no: EM132509743

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