Arbitrage-Free Condition

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Arbitrage-Free Condition

A situation in which all relevant assets are priced appropriately and there is no way for one's gains to outpace market gains without taking on more risk. Assuming an arbitrage-free condition is important in financial models, thought its existence is mainly theoretical.
References in periodicals archive ?
Modern discussions of the no arbitrage condition take place mainly in the context of the pricing of risky financial assets.