Publisher's Synopsis
This book uses the concept of arbitrage to value securities, that is to construct the elements of financial economics.;The book is divided into three parts. Part 1 develops the foundations for the study - it introduces the concepts of securities and arbitrage and establishes the basic arbitrage theorem, that security prices may be expressed as expected discounted values. Part II applies the basic theorem in a single-period setting - it develops a version of the capital asset pricing model under exact arbitrage and the arbitrage pricing technique under approximate arbitrage. Part III extends the discussion to a many-period setting. It uses static arbitrage to value futures and related securities, dynamic arbitrage to value options and other derivatives, and, as a coda, risk arbitrage to investigate market efficiency.
