Arbitrage :

3. The stock PolarBear.com trades on both the South Pole Stock Exchange and the North Pole Stock Exchange

(a) Suppose the price on the North Pole is $18. What does the No-Arbitrage Condition say about the price on the South Pole? (Assume no trading costs.)

(b) Suppose the price on the North Pole is $18 and the price on the the South Pole is $17? How can you make an arbitrage profit? (Assume no trading costs.)

(c) Suppose that the price on the North Pole is $18, that the cost of shorting is $2 and the cost of buying is $0 on both poles. What does the No-Arbitrage Condition say about the price on the South Pole?