Assume You Discovered an Opportunity for Locational Arbitrage Involving Two

Multiple Choice

Assume you discovered an opportunity for locational arbitrage involving two banks and have taken advantage of it. Because of your and other arbitrageurs' actions, which of the following adjustments must take place?

A) One bank's ask price will rise, and the other bank's bid price will fall.
B) One bank's ask price will fall, and the other bank's bid price will rise.
C) One bank's bid/ask spread will widen, and the other bank's bid/ask spread will fall.
D) One bank's ask price will rise, and the other bank's bid price will fall AND one bank's bid/ask spread will widen, and the other bank's bid/ask spread will fall.