单选题

If the price of a U.S. Treasury security is higher than its arbitrage-free value, a dealer can generate an arbitrage profit by:

A、 shorting the U.S. Treasury security and calling it from the issuer.
B、 shorting the U.S. Treasury security and reconstituting it from strips.
C、 buying the U.S. Treasury security, stripping it and selling the strips.

【正确答案】 B

【答案解析】

B is correct because strips can be purchased to create a synthetic U.S. Treasury security to cover the short at a price lower than the price at which the U.S. Treasury security was shorted, generating a profit.