Arbitrage between grading and parent share mainly considers liquidity and predictability of parent share net value. For example, if A is 1.0 1 and B is 1.09, and the ratio is 5: 5, then if the parent is outside 1.045- 1.055, the transaction cost will be considered. For example, the previous day's net value 1.03, today's market rose by 3%. The reasonable expectation is 1.06, and arbitrage is allowed, but the actual closing net value of the parent fund is 1.05, and arbitrage fails.
The other is the arbitrage between the parent stock and the futures. If it is the same target, such as Prudential 300 and 300 futures, and the beta is 1, the arbitrage effect is better. Otherwise, if Prudential 500 and 300 futures are used for arbitrage, if the spot falls on the same day, the futures will rise, but investing in the spot and shorting the futures will fail. Therefore, funds with different targets, other indexes and active investment funds all have higher arbitrage risks. The more conventional approach here is to hedge the spot market risk with futures to earn the active income of fund managers or the active income of plate rotation.
When BS model is applied to options, we can analyze the pricing of A-the discount of A is an implicit option. Risk-free return+futures is used to determine spot arbitrage, but be careful not to forget to consider the spot dividend factor.
Monte Carlo is more used for the long-term discount of cash flow with path dependence, for example, considering the discount factor, Monte Carlo must be used to price A.
Theoretically, A is a long-term national debt with a duration of about 15, but this theory has not been proved in practice (at least my research results are like this). It's interesting to go back with historical materials. If you can find the pricing mechanism of A, it will be very valuable to your investment.
My email address is zippzdotzippiz @ 126.com, and you can discuss it by email if you are interested.