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On the law of one price


  • Jean-Michel Courtault


  • Freddy Delbaen


  • Yuri Kabanov


  • Christophe Stricker



We consider the standard discrete-time model of a frictionless financial market and show that the law of one price holds if and only if there exists a martingale density process with strictly positive initial value. In contrast to the classical no-arbitrage criteria, this density process may change its sign. We also give an application to the CAPM. Copyright Springer-Verlag Berlin/Heidelberg 2004

Suggested Citation

  • Jean-Michel Courtault & Freddy Delbaen & Yuri Kabanov & Christophe Stricker, 2004. "On the law of one price," Finance and Stochastics, Springer, vol. 8(4), pages 525-530, November.
  • Handle: RePEc:spr:finsto:v:8:y:2004:i:4:p:525-530
    DOI: 10.1007/s00780-004-0124-9

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    Cited by:

    1. Teemu Pennanen, 2014. "Optimal investment and contingent claim valuation in illiquid markets," Finance and Stochastics, Springer, vol. 18(4), pages 733-754, October.
    2. Teemu Pennanen, 2008. "Superhedging in illiquid markets," Papers 0807.2962,
    3. Tom Fischer, 2015. "No-Arbitrage Prices of Cash Flows and Forward Contracts as Choquet Representations," Papers 1506.01837,, revised Jun 2015.


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