Journal Article
Arbitrage: the key to pricing options
Abstract: Arbitrage has become associated in popular attitudes with the most ruthless and profit-driven of human impulses, but the opposite reputation might be more well-deserved. The ability to arbitrage is essential for the efficient operation of markets. An interesting application of the principle of arbitrage arose when it provided the breakthrough insight in economists? solution to a formerly intractable problem: how to properly price the emergent financial instruments known as options.
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Bibliographic Information
Provider: Federal Reserve Bank of Cleveland
Part of Series: Economic Commentary
Publication Date: 2004
Issue: Jan
Order Number: 1