On the law of one price
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
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Volume (Year): 8 (2004)
Issue (Month): 4 (November)
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