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.
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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 no-arbitrage condition should not be required in a fair value framework.
Since puts, calls, and forwards are typically priced under no-arbitrage conditions, 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?
Under ideal conditions, the no-arbitrage condition stipulates a relationship between short-term and long-term interest rates on securities of comparable credit quality.
Did quantitative easing work?
First, we rewrite the no-arbitrage condition for Northern production.
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 no-arbitrage condition implies that individuals require the same rate of return to both factors of production.
Regional external economies and economic growth under asymmetry
Using the expression for profits (5) in the no-arbitrage condition (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 no-arbitrage condition for bond prices into a no-arbitrage condition for yields.
Forces That Shape the Yield Curve
Thus the no-arbitrage condition requires that at any point in time
The influence of firms' financial policy on tax reform
The no-arbitrage condition 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
99% accuracies when predicting no-arbitrage conditions.
Conditions of pure arbitrage applications: evidence from three currencies
As in the Vasicek (1977) model, the no-arbitrage conditions 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 no-arbitrage conditions.
Evidence on the Efficiency of Index Options Markets
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