is not always necessary to hold your arbitrage positions up to futures expiration. One can unwind an arbitrage position early if the over-or-under-pricing of the futures contract reverses direction. This can generate arbitrage profits in excess of what you had budgeted for when you initiated the arbitrage. How? Explain clearly. What risky "arbitrage" strategy does this suggest? What is the effect of the risky "arbitrage" strategy on the no-arbitrage window, and why? What will be change in mispricing if futures are: Overpriced? Under-priced? Is mispricing predictable to some extent when arbitrageurs are active? Does this mean that mispricing can predict cash and/or futures prices in the short-term? Is it cash or is it futures, and why?