Finance Theory — 6.3: Law of One Price
Автор: Ludium
Загружено: 2026-02-17
Просмотров: 6
Описание:
What if you could make guaranteed money with zero risk and zero investment? In finance, these opportunities exist—but only for milliseconds. This video explains the Law of One Price, one of the most powerful principles in finance, and reveals how arbitrage keeps markets honest.
You'll learn why identical assets must trade at identical prices, how traders exploit price discrepancies through risk-free arbitrage, and why these opportunities vanish almost instantly.
📚 Key concepts covered:
• The Law of One Price — why identical cash flows must have identical prices
• Arbitrage mechanics — the three-step process to risk-free profit
• Bond replication — how coupon bonds can be replicated with discount bonds
• Price convergence — why arbitrage opportunities disappear in milliseconds
• Prices as information — how market prices reveal collective knowledge
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📖 ORIGINAL SOURCE
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This video distills concepts from academic finance lectures.
Source: • Ses 6: Fixed-Income Securities III
Full credit to the original creator. Please visit the source for the complete lecture.
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