Arbitrage pricing theory states that smart traders will identify and exploit any price inconsistencies between related financial instruments, which will drive prices towards an equilibrium where no arbitrage opportunities exist. This course aims to find these arbitrage-free price equilibria by determining whether observed prices are internally consistent without making judgments about any single price being right or wrong.
Arbitrage pricing theory states that smart traders will identify and exploit any price inconsistencies between related financial instruments, which will drive prices towards an equilibrium where no arbitrage opportunities exist. This course aims to find these arbitrage-free price equilibria by determining whether observed prices are internally consistent without making judgments about any single price being right or wrong.
Arbitrage pricing theory states that smart traders will identify and exploit any price inconsistencies between related financial instruments, which will drive prices towards an equilibrium where no arbitrage opportunities exist. This course aims to find these arbitrage-free price equilibria by determining whether observed prices are internally consistent without making judgments about any single price being right or wrong.
Arbitrage pricing theory states that smart traders will identify and exploit any price inconsistencies between related financial instruments, which will drive prices towards an equilibrium where no arbitrage opportunities exist. This course aims to find these arbitrage-free price equilibria by determining whether observed prices are internally consistent without making judgments about any single price being right or wrong.
opportunities and trade on them This will increase the demand for the bond and raise its price until no further arbitrage trades are possible, i.e. until prices are in equilibrium In this course we are interested in finding those equilibria, e.g. arbitrage-free prices We can not say whether it was the bond price or the banks interest rate that was wrong We can only say (and only care) if the prices are internally consistent