A situation in which all relevantassetsarepricedappropriately and there is no way for onesgainsto outpacemarketgains without taking on morerisk. Assuming an arbitrage-free condition is important infinancial models, thought its existence is mainly theoretical.

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Since the middle regime [theta] [ECT.sub.t-k] [less than or equal to] [[theta].sub.+] can be interpreted as a

, it allows the identification of short-term arbitrage opportunities in the lower ([ECT.sub.t-k] [[theta].sub.-]) and in the upper ([ECT.sub.t-k] [[theta].sub.+]) regimes, when they occur.

Price Adjustments and Transaction Costs in the European Natural Gas Market

As noted by Blanchard and Watson (1982), when the bubble either bursts (with probability 1 – [pi]), or has a price increase with probability [pi], a non-bursting bubble has to grow at a rate 1 + r/[pi] – 1, in order to satisfy the

Credit Growth, Rational Bubbles and Economic Efficiency

In fact, some have argued that because of frictions or inability to practically hedge, no-arbitrage arguments should not necessarily apply, or the

should not be required in a fair value framework.

Marketability Discounts, Fair Value, and the Forgotten Market Participant: When Do Discounts Represent Distortions?

stipulates a relationship between short-term and long-term interest rates on securities of comparable credit quality.

Offshoring production: a simple model of wages, productivity, and growth

. Not only does it express agents required rates of return to both types of capital, but it also can be used to show how the accumulation of factors occurs:

Regional external economies and economic growth under asymmetry

We can derive the risk-neutral probabilities of the entire evolutionary process of the R&D project based on the

. According to the estimated cash flows derived from the R&D project, its fair value can be calculated by a backward procedure with respect to the risk-neutral probabilities.

Evaluating R&D projects with hedging behavior: decision makers can systematically reduce the unique risk of an R&D project by taking the firm s hedging behavior into account

(8), and rearranging terms, one can find that: (14)

Virtual integration and endogenous growth in the world economy

In this case, the payoffs are so closely related that the price of the option is completely determined by the

To derive a closed form expression for the market value of the firm in model 1 we invoke the

. This states that the expected returns from holding equity (the sum of dividends D and capital gains [Mathematical Expression Omitted] net of tax) must be in line with those from holding bonds (the nominal interest rate [r.sub.B] net of tax).

The influence of firms financial policy on tax reform

holds which equalizes rates of return (possibly adjusted for risk) on assets in different locations.

Investment, saving, and taxation in an open economy

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

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