The fundamental theorem of asset pricing explains how financial markets work by showing that if there is no way to make money for free, then there must be a fair price for assets. This means that there is a special way to measure the value of assets that makes sure nobody can cheat the system. The theorem was proven using a mathematical model with a limited number of possibilities and a set time frame. This important idea was first developed by Black, Scholes, and Merton in the 1970s.