A situation in which all relevantassetsarepricedappropriately and there is no way for onesgainsto outpacemarketgains without taking on morerisk. Assuming an arbitrage-free condition is important infinancial models, thought its existence is mainly theoretical.
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In fact, some have argued that because of frictions or inability to practically hedge, no-arbitrage arguments should not necessarily apply, or the
should not be required in a fair value framework.
Since puts, calls, and forwards are typically priced under
, it is not surprising that all the above equivalence relationships result in the fair value of the nonmarketable and marketable security being equal.
Marketability Discounts, Fair Value, and the Forgotten Market Participant: When Do Discounts Represent Distortions?
stipulates a relationship between short-term and long-term interest rates on securities of comparable credit quality.
Offshoring production: a simple model of wages, productivity, and growth
Although the Euler equation for human capital reflects the contribution of human capital across both sectors, the
implies that individuals require the same rate of return to both factors of production.
Regional external economies and economic growth under asymmetry
(8), and rearranging terms, one can find that: (14)
Virtual integration and endogenous growth in the world economy
3) The last section discusses how to translate the
The influence of firms financial policy on tax reform
for a foreign asset with an income of X*(s) and its domestic perfect substitute yielding X*(s)e(s) is
Currency swaps, financial arbitrage, and default risk
Conditions of pure arbitrage applications: evidence from three currencies
restrict the relative pricing of bonds with different maturities while remaining silent about all other conditions that characterize the equilibrium in the economy.
No-arbitrage restrictions and the U.S. Treasury market
It first presents theoretical pricing relationships implied by
Evidence on the Efficiency of Index Options Markets
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