Economics, Econometrics and Finance
8 years ago

New Research Reveals How Markets Stay Free of Wealth-Creating Loopholes

ZEW economic studies
Arbitrage-Free Markets and the Pricing Kernel
Erik Lüders

Paper Summary

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The article discusses how financial markets are assumed to be free of arbitrage opportunities, meaning no risk-free profits can be made. The researchers introduce the concept of arbitrage-free markets and explain their importance in pricing assets accurately.